Closing On Your Property
What is a Real Estate “Closing”?
A “closing” is where you and your agent meet with some or all of the following individuals: the Seller, the Seller’s agent, a representative from the lending institution and and your lawyer, 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 recorded 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. Your agent or escrow officer will notify you of the exact amount before closing on your property with a document called a “Closing Disclosure”.
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 for future payments. 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 are due.
What is Title Insurance?
Title Insurance is a policy that protects a buyer against errors, omissions, or defects in the title of the property. A title insurance policy covers corrections for problems that did not show up during the title search or were missed by the examiner. It also protects you against errors in public records. If title problems are found after closing, the policy will pay your legal fees if you must go to court to defend your deed. If you lose the property, the insurance should pay you for the loss up to the amount of the policy.
In spite of these benefits, there are some circumstances that title insurance does not cover. A title insurance policy does not cover defects that occur after you purchase the property. Policies often exclude problems with easements, mineral and air rights, and liens. Ask your attorney or closing agent for an explanation of all exclusions, and for a recommendation as to which items should be cleared up prior to closing. You do not have to buy title insurance if you purchase the property in cash. A mortgage lender will require a policy in its name to cover its interests. The lender may or may not require you to buy a policy for your own protection.