Escrow & Closing

What is Escrow?

Once you have successfully ratified (get into contract), escrow begins, which comprises of two things:

the length of time necessary to complete the purchase or sale of your property and,

the inclusion of a neutral third party in the transaction (an escrow officer at a title company) who acts as an intermediary to create a secure environment in which to collect and disburse all the funds and documents related to the purchase of your property, including recordation and delivery of the deed to the buyer and any proceeds to the seller at closing.

During the escrow period, there are many activities going on simultaneously of which you will be a part. You will be very busy during this time. You should plan to ease your normal routine to make time for meeting your contractual responsibilities. 

A few of the buyers’ activities will comprise of:

• Schedule and attend physical inspections.
• Work through the financing specifics with your mortgage broker or direct lender to secure financing
• Review all disclosure materials
• remove contingencies.
• Increase your deposits for down payment and closing costs
• Choose how you want to hold title if more than one person is buying the property
• Sign loan documents
• Review the accounting of moneys owed (or received from) escrow
• Arrange for hazard insurance
• Give 30-day notice to your landlord if you are renting.  I recommend waiting until your loan has been approved or giving a provisional notice.
• Select a moving company and begin packing.
• Arrange for all utilities to start when you close escrow.
• Notify the post office, doctors, banks, and others of your new address.

A few of the seller’s activities will comprise of:

• Making the property available for inspections
• Answering questions
• Making negotiated repairs
• Preparing to move
• Compiling information requested from the buyer

What closing costs should I expect?

Closing costs are the moneys necessary to pay off all expenses incurred by buyer and seller on a property.  This will include an accounting of all funds spent and received in the transaction for both the buyer and seller.  Following is a partial list for items generally paid for by either buyer or seller in San Francisco.

Buyers:

• Escrow fees
• Title insurance
• Loan fees, including points
• Appraisal fee
• One year’s hazard insurance premium (if not a condominium)
• Deed recording fees
• Notary fees
• Prorated property taxes split between buyer and seller
• Pre-paid interest to your lender
• Prorated homeowners dues is you are purchasing a condominium.

Sellers:

• Transfer tax
• Real Estate agent commissions
• Loans and loan fees (to close out existing loans)
• Prorated property taxes split between buyer and seller
• A portion of the taxable gain if above allowed limits
• Prorated rents and security deposits if an income property
• Deed and recording fees

The estimate of closing costs is generated when both the agents in the transaction, provided to the escrow officer that reflect the terms and conditions of the purchase contract.  The escrow officer will then compare the two sets of instructions and, if they match, the escrow holder will execute these instructions, disbursing funds and recording the deed which marks your ownership of the property.