Valerie Bomberger

Closing and Escrow Processing


Purchasing a home involves a lot of money, many steps, and many documents. Because the transaction is complex, buyers and sellers do not exchange money directly with each other, but through a neutral third party in an escrow account. The escrow period begins when the seller accepts the buyer’s offer and the buyer puts down earnest money. The escrow officer, usually the title company or the listing office depending on what area of the country your sale takes place, holds the money and related documents until closing. Other duties of the escrow officer includes keeping all parties aware of the status of documents and funds related to the purchase; securing a title insurance policy, facilitating the requirements of the lender; prorating and adjusting insurance, taxes, rents and other fees; recording the deed and loan documents; and keeping track of all money owed and deposited. During the escrow process, the sellers must carry out escrow instructions, including providing the deed to the property. They must also submit all other documents requested by the escrow officer, such as tax receipts, home warranties and insurance policies. The buyers’ responsibilities include submitting a down payment and executing a deed of trust to secure the mortgage loan. They approve inspection reports, preliminary title reports and any other items specified in the sale agreement. When the deed is filed and title to the property is transferred to the new owner, the deal is complete and the escrow is closed. The buyer and seller will receive a final closing statement which should be kept with their important papers. The documents will be needed the next time income taxes are filed. I have put together a detailed list of what an escrow officer's duties are.

Let's Talk Title insurance!
Buyers often ask why they need title insurance. Most homes for sale have a history. The title company does a thorough search of the title to see if there are any defects. By taking out title insurance most policies provide title protection from problems that may appear after the buyer closes the transaction. Some problems may be criminal but most are just errors that need been resolved.The criminal ones include false impersonation of the owner and forgeries or fabricated documents that have been filed in the public records. These can jeopardize the buyers legal claim to the property. 
  • The property may have an easement or survey disputes. The title company checks to see if surveys have been filed on the property and if there are any disputes. Some deeds have easements that may be problematic to the buyer. They may stop the buyer from using their property as they like.
  • The tile company checks for liens and encumbrances on the property. All liens must be discharged before or at the time of the purchase of the property. Some properties have restrictions or covenants limiting the use of the property. Knowing the limitations of the property before you buy is a must. There might also be another owner of the property that you are not aware of. The title company will find this when they do the title search.
  • If you are purchasing a home from an estate many things need to be checked. There may be missing heirs that are named in a will or other people that feel they should have been in the will. There may be a missing will that shows up at a later date. By having a title company cross all the t’s and dot all the i’s you are covering yourself for the future.
  • One of the most common problems with a deed is clerical or filing errors. The title company knows what to look for. Having title insurance is a no brainer. Protect your investment.

What you need to know about choosing a closing date
There are advantages to choosing a closing date either close to the first or close to the end of the month. Whether you are the buyer or the seller, you have a vested interest in the closing date working for you. The date is negotiable until the contract offered by the buyer is accepted by the seller. From that point on, all efforts must be made to ensure the date is met. If you don’t close on time, you can complicate your move and risk losing the house.
  •  As a buyer, you need to give yourself plenty of time to work out details with your lender. Most people set a closing date 30 to 45 days after the offer is accepted. A home purchase has many moving pieces and there’s always a risk that more time will be required than you think. For example, the lender may ask for additional documentation as part of the loan process. Unless you are paying cash, you don’t want a quick closing date.
Frequently, it is wise to choose a closing date near the end of the month. Interest is prorated from the date you close to the last day of the month, so you will pay less if you close near the 30th.

 For example, if you close on July 10, you will have to pay 21 days of interest. If you close on July 25, you only pay six days of interest resulting in a savings of several hundred dollars due at the time of closing.
  •  However, there are certain advantages to closing early in the month. While you will indeed pay more in pre-paid interest, you won’t have a house payment for nearly two months. This may be your best choice when considering cash flow during your move. Loan interest is paid in arrears and your pre-paid interest will cover to the end of the month.
For example, if you close in early July you won’t have a house payment due for August until the first of September. Also, because many people choose the end of the month for their closing, it is the busiest time for mortgage brokers. If the lender has a backlog, the closing could be delayed.
  • You will establish an occupancy date as well as a closing date. At closing, you will assume ownership of your new home. However, the actual move-in date may occur later depending on your circumstances. Sometimes the sellers have already vacated the property or will move out immediately upon closing. Others may request an extended occupancy due to the move-in date of their next home and will then pay rent to you as the new home owners until they are gone. Also, you may choose to do some renovation work on your new home before moving in and will plan on a later occupancy date. Of course, your plans will need to coordinate with the move-out date of the property where you currently live.
 Throughout the closing process, if I am your real estate agent I will guide you in planning dates and avoiding pitfalls. Lean on me for my expertise and you’ll be living in your new dream home before you know it!
 
Do Not Forget the Homeowners Insurance
Your home is your biggest financial purchase and it needs to be protected. Mortgage lenders insist on homeowners insurance.  It is important to think about the what ifs. Check to see that your coverage includes:
  • Fire 
  • Flood 
  • Vandalism
  • Burglary
  • Storms 
  • Tornadoes - May need supplemental coverage
  • Hurricanes- May need supplemental coverage
  • Earthquakes - May need supplemental coverage
  • Landslides - May need supplemental coverage
  • Sinkholes - May need supplemental coverage
  • Liability coverage if someone gets hurt on your property
  • displacement shelter costs
  • Belongings theft coverage- if something is stolen when not at home
Most standard policies do not include coverage for:
  • Floods
  • Landslides
  • Earthquakes
  • Sinkholes
  • Power Failure
  • War
  • Tornadoes 
  • Hurricanes
You should shop around for a good insurance agent. Ask family, friends and co -workers about their agent. Ask people who have had to file claims how the process went. Do your due diligence. Good luck in your search. 

Keep your credit in check
 You have found your dream house and the sellers have accepted your offer. Don’t Blow it. It may seem like blue skies with nothing to do but pack and wait for the keys to the front door. However, be aware that there are still pitfalls to avoid so you don’t blow the deal before your closing date.
  • Be diligent about keeping your financial situation stable. It used to be that your credit history was reviewed only before you received approval for your loan. Nowadays underwriters check again just a couple of days before closing to make sure that you haven’t accrued any new debts or credit problems.
  • Your credit score played a significant part in securing your mortgage loan, so don’t do anything to jeopardize your score during the weeks before closing. Don’t apply for new lines of credit or deplete your cash reserves for other big purchases, such as a car or new furniture. Be up-to-date with your monthly bill payments as well. Anything that can make your credit score drop could send a red flag to your lender. You don’t want to give them any reason to rethink your loan.
  • There will be a lot of paperwork involved in finalizing your loan and accidental errors are always a possibility. Be very prompt with any requests from your lender for additional documents. Incorrect or missing documents will cause delays in your closing or even halt it completely.
Home inspections will be done prior to closing. You want a thorough inspection that will uncover significant problems with the property. This is not an opportunity to nitpick every flaw and make unreasonable demands from the seller. Inspections are made for your protection as the buyer. Faulty wiring or termite damage are problems that likely need to be addressed before the sale is complete. However, quibbling over small flaws in the paint or a chipped sink or similar cosmetic problems may just aggravate the sellers without any benefit to you. Keep in mind that you may require some accommodation from the sellers before signing the final paperwork. For example, you might need some extra time before closing and want to move the date back a couple of days. This happens frequently. The sellers may be less willing to cooperate if you have turned inspection results into an unpleasant confrontation.

Finally, once your offer has been accepted and your closing has been scheduled, stop looking at other homes for sale. Yes, it is tempting to keep checking on what else has come on the market. But you might end up with a raging case of premature buyer’s remorse. Don’t worry that another house is better than the one you chose. You loved the house when you made the offer and you have a legally binding contract with earnest money paid toward that purchase. Now is the time to make plans for your new house: choose paint colors, make furniture placement diagrams and let the kids decide which bedrooms they want. Be patient and pack. Moving day will come before you know it.

When you close on your new home, you should complete the following:
If moving out of state or far away, ask your bank about electronically transferring your funds to a bank in your new area.  Discuss branch options and arrange for check cashing in your new location.
  • Close out your safety deposit box.
  • Obtain traveler’s checks for traveling funds and for funds while you are settling into your new location.
  • Ask your insurance agent to transfer coverage to your new home.  Make sure all coverage (life, health, automobile, personal belongings, etc.) is in force while you are en route.
  • Schedule a moving company to assist you or begin notifying people who are helping you of your planned move date.
  • Begin depleting your store of canned and frozen foods.  Defrost your freezer and use charcoal to dispel odors.
Now that you have a New Address, you can begin transferring or canceling home services:
  • Electric
  • Cable Television
  • Trash
  • Gas  
Make arrangements for canceling home deliveries and services such as the following.  Arrange for service at your new address.
  • Newspaper
  • Cleaning Service
  • Lawn Service
  • Newspaper
  • Cleaning Service
  • Lawn Service
  • Laundry / Diaper Service
 Let Valerie Bomberger, ABR, AHWD with REMAX Harbor Country help you in the home buying process and answer questions on Closing and Escrow. 

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