May 25, 2024

Jocuri

Mad about real estate

What Does Close of Escrow Mean?

All investors in the real estate sector need to be familiar with the word Escrow. Escrow allows for completion of the sale transaction between the buyer and the seller with the assistance of a neutral third person known as the closing agent or the settlement agent or the escrow agent. He does not make a representation on behalf of any of the participants viz. the buyer, the seller, the real estate agent or the mortgage institute. He plays a neutral role of safeguarding the interest of all the parties involved in the deal. The escrow agent is responsible for carrying out all the activities related to escrow. The term closing of an escrow signifies the last step in a real estate transaction which is essentially related to closure of the real estate deal.

The closing of a real estate transaction happens when the title of the property is transferred to the buyer by the seller. Till such time that this happens, the buyer and seller would keep all the necessary documents and funds in an escrow account held with the escrow agent as the custodian. This implies that the buyer of the property would deposit all the funds needed to purchase whether in the form of his personal equity or the mortgage component in the escrow account. Similarly the seller would be required to furnish all the documents which would enable the title transfer in the escrow. Once the escrow agent verifies and establishes that all the necessary compliances have been achieved by the buyer and seller in accordance with the sale agreement, he would invite all the parties namely buyer, seller, their respective real estate agents and attorneys along with a representative of the lending institute to a closing meeting.

What happens during the closure meeting? During the closing session of the transaction, the settlement agent would make sure that all the costs towards purchase have been deposited in the escrow by the buyer, he would check that the title documents submitted by the seller are in order. He would make sure that the title transfer documents are signed at the right places, witnesses are included and photocopied document available to all the parties. He would then take an acknowledgement from the buyer and seller that the entire monetary and documentation procedure is in accordance with the sale agreement. Even though the necessary funds have been collected from the buyer, the funds are not yet disbursed to the seller until the sale transaction has been recorded.

At the end of the closing session, the closing agent would undertake to get the deed and mortgage registered with the applicable courts. Once the process of formal recording is completed in the books of the government, the closing agent would provide the original deed to the new owner and release the funds to the seller. The entire process having been completed, the escrow is said to be closed indicating the successful completion of the property transaction.