Remember: Signing before Closing.
Often, buyers and sellers think that signing and closing are one and the same. They are not. Signing is a prerequisite for closing. Signing and closing are handled by the escrow company.
You may have seen wording like “the transaction is in escrow.” It means that buyer and seller have entered into a mutual agreement and the contract is now with the escrow company. Escrow is a neutral, disinterested party that directs and coordinates all activities from contract to closing. So if it’s signing before closing, what happens between the signing and the closing?
The Funding Package
Once the seller and buyer (the parties) have signed (executed) their appropriate documents, the escrow agent compiles all the signed paperwork and submits originals and or copies to the lender. We call this process preparing a funding package. The funding package then needs to be delivered back to the lender for review.
Lenders will instruct escrow how to deliver this package, what their specific time frames and requirements will be before they will actually fund the loan. Some lenders require the receipt of documents up to 72 hours prior to funding. Once the lender receives the package they have a specific process which includes reviewing the documents for signatures, making sure all underwriting conditions have been met and verifying employment of the borrowers.
The Recording Package
At the same time, the funding package is being prepared for the lender, escrow also prepares a recording package for delivery to the title company. Once the title company receives the recording package there is a specific process that needs to occur prior to recording the documents with the county.
The escrow company is now in a holding pattern. They are waiting for instructions from the lender to proceed with recording and funding of the transaction. As soon as the lender authorizes funding they will initiate a wire transfer.
The County Records the Transaction.
Once the escrow company receives the wire they will release the recording with the title company. Depending on the time of the wired funds are received determines the recording time with the respective county. Please be aware that all counties have different cutoff times.
Upon receipt of the wire and the recording numbers, the transaction is now considered closed. Escrow will then disburse all proceeds and inform everyone that the transaction is closed.
The Transaction has closed.
While the county recording usually happens before 5 pm, the contract default language allows the seller to stay in the property until 9 pm. Often, the seller agrees in writing to hand over the keys once the county has recorded the transaction.
Thanks to Elizabeth Peterson, Chicago Title and Escrow, who contributed to this article.
First published by Gerhard as his August 2019 View from the Street Newsletter.