What is a Real Estate “Closing”?

A “closing” is where you and I meet with the escrow agent from the title company in order to transfer the property title to you. The purchase agreement or contract you signed describes the property, states the purchase price and terms, sets forth the method of payment, and usually names the date and place where the closing or actual transfer of the property title and keys will occur.

If financing the property, your lender will require you to sign a document, usually a promissory note, as evidence that you are personally responsible for repaying the loan. You will also sign a mortgage or deed of trust on the property as security to the lender for the loan. The mortgage or deed of trust gives the lender the right to sell the property if you fail to make the payments.  Before you exchange these papers, the property may be surveyed, appraised, or inspected, and the ownership of title will be checked in county and court records.

At closing, you will be required to pay all fees and closing costs in the form of “guaranteed funds” such as a cashier’s check. I or the escrow officer will notify you of the exact amount at closing.

What is an Escrow Account?

An escrow account is a neutral depository held by your lender for funds that will be used to pay expenses incurred by the property, such as taxes, assessments, property insurance, or mortgage insurance premiums which fall due in the future.  You will pay one-twelfth of the annual amount of these bills each month with your regular mortgage payment. When the bills become due the lender pays them from the special account. At closing, it may be necessary to pay enough into the account to cover these amounts for several months so that funds will be available to pay the bills as they fall due.

Settlement Statement

Just prior to closing, you will receive a Settlement Statement (commonly called the HUD-1) from the title company for review, and this document describes all monies going into the transaction. If all of the information is correct, this will be the final settlement statement which you will sign at closing.

More information about this form and closing costs in general can be found on this page.