Getting Across the Line

CONGRATULATIONS! Chill the champagne for now and focus on getting through escrow. Oh, and you may be wondering, “what is escrow exactly?”

We are in contract! Woot. There’s a ton to do to get us from a “ratified” contract (i.e., all parties have signed identical versions of the written contract) to when the deal is closed and when keys are in hand, which can be as short as 3 to 5 days, an average of 14 to 30 days or up to 45 days depending on how our purchase is structured.  

Our contract lays out the three broad types of activities that need to get done (and when) so we can close on the transaction:

1. Financing
2. Title
3. Documentation & Property Condition

Here’s our checklist approach that will apply:  

Financing Considerations

Because you’re getting financing your loan representative and their underwriting team will now become the most important people you need to talk with while we take a slight step back. Most purchases that fail to close are halted by a financing issue of some kind. So now more than ever, it’s important to respond and answer lender calls or pings quickly — but be mindful of what you say and how you answer.

And yes, you will end up repeating answers to questions you’ve already answered, resending documents and you’ll do so with a smile! We find that financing is usually the most frustrating part of most people’s purchase; akin to a rite of passage. Just remember you’re doing it for a very good reason! Here’s what takes place:

• Send Ratified Contract to Lender (we will do this)
• Review and Confirm Wire Instructions from Escrow Company; Ensure Deposit is Wired to Escrow within 2 business days
  • It’s best to capture a screenshot of the transfer or if there’s a delay show the chain of custody of the deposit funds
• Once ready, we will send Preliminary Title Report (issued by Escrow) to the Lender
  • If needed, resend HOA budget, CC&Rs and Master Insurance Policy to Lender
• We will send you a reference to buy Homeowner Insurance
  • After you decide insuresr, have them send Insurance Binder to the Lender and to Escrow
• You will provide Lender payment information for Appraisal
  • Appraiser will contact Listing Agent for access to property
  • The appraiser will cost $600-$800
  • Don’t be surprised if the amount the appraisal comes in at the exact contract price
• Appraisal takes place and results should be back within 3-5 days
  • If needed, remove appraisal contingency
• Understand lender conditions (if any)
• About 1-2 weeks before close, liquidate down payment (if non-liquid)
  • Again, chain of custody is important
  • If you have any uncertainty about the stock market or stock prices, sell early
• Understand the Lender Closing Disclosure and 72-Hour Cooling Off Requirement
• Confirm wire instructions to transfer down payment to Escrow
• Understand Loan Docs and what they mean
• If Lender provides discount for auto deposit/pay and/or on-deposit account open that account
• Understand final days of transaction

WHO DOES WHAT

The Neutral: Title Company/Escrow Officer

These are the folks who handle the money, the loan paperwork and signings as well as the title deed transfer and accompanying title insurance. Here’s what you should expect to do or at least know about:

• Receive wire instructions for Initial Deposit/Earnest Money Deposit (3%); call Escrow Officer to confirm instruction account numbers, routing numbers
• Initiate transfer of deposit monies to Escrow Company; keep screenshots of wire/EFT confirmation as PDFs to show chain of custody of funds
• Review updated Preliminary Title Report from Escrow Officer (shows any debts existing, property taxes dues, any HOA type of documents)
• Consider how you want title to ‘vest’ (i.e., what name and descriptor will appear on the Title Deed that gets recorded with County)
• If insurance agent doesn’t, ensure that Homeowner’s Policy Binder for Property is sent to Escrow (required for a mortgage, not for cash)
• If getting financing, Escrow Officer will send a copy of the Closing Disclosure — understand there is a mandatory 72-hour waiting period before mortgage loan documents can be generated and sent to Escrow Officer
• Confirm wire instructions to send remainder of down payment
• Schedule appointment with Escrow Officer to go to office and sign deed transfer, tax documents (If all-cash, DocuSign is sufficient). If borrowing, sign the above and loan documents in person as wet ink signatures before a notary is required (schedule mobile notary if you’re unable to go to office or if co-borrower is elsewhere)
• Freak Out and understand it is all worth it (this happens to everyone to varying degree)
• Understand Title Insurance and Mortgage Title Insurance
• Sign Deed Transfer, tax documents; Mortgage documents (ID required)
• Transfer remainder of down payment (or payment) to Escrow Company
• Await Escrow Officer to confirm that we are, ‘on record,’ i.e., closed
• Coordinate with Kevin and Jonathan to get keys, property access
• If needed, be prepared to verify employment with appropriate person at work
• Understand and review Closing Disclosure Document that explains loan, fees and costs; if any changes, alert everyone immediately as 72-hour cooling off period resets and restarts
• Coordinate signing (mobile notary or in-office) appointment
• Call to setup utility service, post-close work
• Ask questions if any is unclear
• Expect a glitch to take place somewhere during process, rest assured we’ve handled it before

THE BUYER SIDE:

The Buyer’s Agent

Lest you think we’ve gone away — we haven’t. We’re monitoring the escrow’s process and there are things to be done for us on your behalf too!

• Send Purchase Contract and Addenda to Escrow Company (and/or open escrow at preferred Escrow/Title Company)
• Confirm Deposit is sent and received
• Send any other Addenda to Escrow Officer reflecting changes to purchase terms as they develop
• If applicable, send Home Warranty information to Escrow Officer
• Coordinate any Lender issues
• Coordinate any Buyer credits/concerns
• Facilitate removal of any contingencies
• Ensure Buyer reviews, understands and acknowledge Property Disclosure documents by getting Buyer initials and signatures on such
• Perform Agent Visual Inspection
• Facilitate any return property visits
• If needed, meet appraiser at Property
• If needed, meet clients and/or inspectors at Property
• If needed, conduct renegotiations depending on changed circumstances
• Send final escrow instructions to Escrow Officer
• Assist/attend Buyer Signing
• Monitor final transfer of funds to Escrow Company and recording of Property’s transfer
• Coordinate key transfer/Property possession

Buyer Logistics

And if all of that wasn’t enough, don’t forget about these things too:

• Confirm EFT/wire instructions to send 3 percent Initial Deposit/Earnest Money Deposit; do so within 2 business days
• Complete and comply with any Lender conditions/terms
• Prepare remainder of down payment; transfer to Escrow
• Understand and sign any additional Disclosure Documents Agent provides
• Follow-up Property Visits (if any)
• Give Notice
• Arrange Movers
• Get new Homeowner’s Insurance estimate and binder

THE SELLER SIDE

The Sellers

Provide loan information to Escrow Officer 

Authorize Escrow Officer to secure mortgage pay-off demand from Lender(s)

Alert HOA of pending transfer/sale; Escrow Officer will coordinate any fees

Understand fees, prorated taxes, pay-off demands

Surrender keys, controllers

Remove any personal property from property and/or excluded fixtures 

Sign all relevant documents including deed transfer documents

Alert Escrow Officer as to where sale proceeds will be sent

Vacate if not already done; clean

Ensure insurance and utilities remain in effect at Property until Buyer’s insurance and utilities take over

Seller’s Agents

• Will meet an appraiser at the property
• Ensure that all required energy efficiency and water conservation inspections are completed
• Ensure that Seller and Escrow Company ask for any applicable pay-off demands from lenders or others
• Ensure that any liens are released and accounted for with Escrow Officer
• Ensure all staging is removed
• Provide access to property if Buyers want to come back for inspections or measurement
• Ensure that all required disclosure documents are signed and returned
• Keep the property safe and secure during the escrow period
• Provide key/access information to the new owners once escrow has closed  

TIMELINE

It’s closing week! You made it this far and we’re almost there. A few things that will take place this week: 

Your loan has been approved and the loan documents are being finalized and should arrive at the escrow company for your signatures within the next couple of days.

We should have the amount that you’ll need to wire to escrow thanks to the Closing Disclosure document. If, for some reason, there’s a lag or delay we might advise that you send a little extra along with the amount states as they’ll be able to issue you a refund check as soon as we close (which is defined where when the title transfer documents record, not the signing). If we’re short money it’s far more problematic; so we’d rather you be prepared than not.

The escrow company will prepare the loan documents along with deed transfer documents and handle collecting funds, calculating who gets what and all the other details required for closing. 

The escrow company will reach out to coordinate the signing at her office once everything is ready. For any co-signers not in the city or otherwise unavailable escrow will new to schedule a mobile notary public to meet them or coordinate a signing at a different office of the escrow company. The other person will need to sign the same set of docs (so old school I know). If this happens we will need to account for this in the timeline and FedEx may make a lot of money off of us. (Note: the notary/escrow people will handle the documents so you never do). 

The actual signing should take about 45 minutes. If, for some reason you’re unable to go in we can get that mobile notary to meet you at home or elsewhere. 

Some banks will send their funds along with their loan documents while others don’t. If so, what this means is that the loan documents and the funds will arrive at the escrow company pretty much at the same time. Otherwise, lenders wait until their signed loan documents (most time a scan of them with originals to follow) are returned for their review before sending final instructions to disburse their funds in accordance to the terms of the contract and closing instructions everyone has sent them. 

As for the signing appointment, you’ll need to bring your photo ID to the signing. Depending on when the appointment is we always like to be there as well. So, schedule permitting I will be there too (although you can sign without me being there). 

Remember, your remaining portion of purchase funds must be wired or paid for by cashiers’ check – not a teller’s draft note but cashiers check; and unless you hear otherwise, not EFT, or wire only! 

After you sign the loan documents, the escrow company will send them back to the lender — via scan – and a lender will do their final quality control. (Usually this is just a pro forma step but it’s still important for them to do so). After the lender completes their satisfactory review of the documents (usually completed within an hour or two upon receipt) they will then tell the escrow company to release the funds. Combined with your monies then the escrow company will then issue the checks/transfer the funds to the appropriate parties and direct the deed transfer documents to be released for recording at the County Recorder’s office as well. Those documents are the recorded on the same day or the next day by courier/messenger. Typically we hear by lunch time or shortly thereafter in the afternoon that we are “on record.” That means that the deed transfer has been recorded we are then officially closed and the property is yours. We will coordinate key access and the such. 

Let me know if you have any questions. 

Post Close:

• Understand Mortgage Interest Deduction (with Accountant or Financial Professional)
• Adjust W4 withholding if desired
• Understand Supplemental Tax Bill is forthcoming; plan and save as prepayment not possible
• Understand refinancing options, timelines, costs, incentives
• Understand ‘due upon’ clauses in mortgages
• Understand Capital Gains time periods and primary residence exclusions; marriage exclusion