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As a Buyer or Seller, you want to be certain all conditions of sale have been met before the property and money change hands. The technical definition of a
closing
is a transaction where one party engaged in the sale, transfer or lease of real or personal property with another person delivers a written instrument, money or other disbursement upon the happening of a specified event or the performance of a specified condition. Simply stated the
closing
agent impartially carries out the written instructions given by and agreed upon by the principals. |
This includes receiving funds and documents necessary to comply with those instructions, completing or obtaining required forms and handling final delivery of all items to the proper parties upon successful completion of the escrow.
The
settlement
agent must be provided with the necessary information to
complete
the transaction. This may include loan documents, tax statements, fire and other insurance policies, title insurance policies, terms of sale and any seller-assisted financing and requests for payment for various services to be paid out of
settlement
funds.
If the transaction is dependent on arranging new financing, it is the responsibility of the buyer to make the necessary arrangements for application, qualification, etc. Documentation of the new loan agreement must be in the hands of the
settlement
agent before the transfer of property can take place. A real estate agent may help to identify the appropriate lending institutions.
When all the instructions
for the closing
have been carried out, the closing can take place. At this time, all outstanding funds are collected and fees-such as title insurance premiums, real estate commissions, termite inspection charges-are paid. Title to the property is then transferred under the terms of the purchase contract/closing
instructions and appropriate title insurance is issued.
Payment of funds at the
closing
of escrow shall be in the form acceptable to the escrow agent. Usually the
settlement
agent will require cashiered or wired funds since out-of-town and personal checks can cause delays in processing the transaction.
The following items represent a typical list of what an escrow agent does and does not do.
Escrow Agent Does:
- Serves as the neutral “stake
holder” and the communications
link to all parties in the transaction
- Prepares instructions
- Requests a prliminary title
search or title commitment
to determine the present condition of the property
- Requests a
lender’s
statement if debt or
obligation is to be taken over assumed by the buyer
- Complies with lender’s requirements specified in the purchase contract/
closing
instructions and lender’s instructions
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- Receives purchase funds from the
buyer and seller, if necessary
- Prepares or secures the deed or other documents related to the
closing
- Prorates taxes, interest, insurance
and rents according to instructions
- Secures releases of all contingencies
or other conditions as required in
the
closing
- Records deeds and any other documents as instructed
- Requests issuance of the title
insurance policy
- Closes the
transaction
when all the
instructions of the buyer and seller
have been carried out
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- Disburses funds as authorized by
instructions, including charges for title insurance, recording fees, real estate commissions and loan payoffs
- Prepares final statement for the parties accounting for the districution of all funds deposited with
Settlement
Agent.
These statements are useful in
preparation of tax returns
Escrow agent does not:
- Offer legal advice
- Negotiate the transaction
- Offer investment advice
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