Grab your coffee. It is that time again, Transaction Tuesday where we answer all those questions you forget to ask about the real estate transaction process. We answered the question not long ago about what escrow is so now we will touch on what happens during the escrow process. My husband, Greg Urata, wrote a book called, First-time Home Buying in a Nutshell, and I am borrowing this description of the escrow process from it to share with you to help you know what to expect when you enter the escrow process.
The Escrow Process
1) Getting the Purchase Agreement
After all parties to the contract have signed, the agent will open escrow and submit the contract to escrow. Some states use lawyers in lieu of escrow to process the transaction. This author is not familiar with how the transaction is handled in those states.
2) Escrow Instructions
Escrow will create escrow instructions outlining the specifics of the transaction.
3) Preliminary Title
Escrow will order a preliminary title report. A preliminary title report is a document that outlines information that is pertinent to the property such as easements, liens, encumbrances, etc that might compromise free and clear title to the property. It is important for buyers to review this document to make sure they are not going to unknowingly encumber themselves through buying the property
4) Estimated HUD 1
This is a document that lists the preliminary financial accounting of the costs and financing amounts of the transaction. There is a final HUD 1/Settlement Statement issued at the end of the escrow process to show the final costs and financing amounts of the transaction.
5) Payoff Demand
This is a request made by escrow to the current mortgage holder of the existing loan(s) on the property for the total amount due to pay off the loan.
6) Drawing Docs
The process in which the buyer’s lender prepares the documents (loan contract) to be sent to escrow to be signed by the buyer. Escrow usually reviews the documents to ensure they are accurate.
7) Signing Docs
When the loan documents are signed by the buyer in escrow (or by the lender) witnessed by a notary.
The signed documents are returned to the lender and the lender then funds the loan by sending funds to the title company which, in turn, sends the proceeds to escrow for disbursement.
9) Record and Closing
After funding, the title company records the title at the County Recorder’s Office.
While this does not cover everything that goes on during the process it does outline the basic items that your escrow officer is working hard to complete on your behalf during the escrow period. Your agent is also handling many details that must be addressed prior to the close of escrow that are not touched on here.
I hope this helps make you feel more comfortable while you go through the transaction process. If you have any questions please just give me a call.
See you in the neighborhood,
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B W Real Estate Group
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