In the traditional real estate transaction, be it a sale or refinance of a property, it is the escrow company that directs the transaction, pursuant
to instructions from the parties to the transaction, buyer, seller, lender, etc.
In most cases you will be dealing with professionals who do this all of the time. To them the process is pretty automatic but even though you are not directly involved in the last few steps, it’s good to know what happens at the end of an escrow. Here’s a brief overview
When all objectionable matters have been cleared from the title report, and all other contingencies in the transaction have been met, the escrow company contacts the lender and requests that the loan be funded. The funds are then transferred to the title company, normally via wire transfer and are received by the title company’s bank. At the time the funds are requested, the escrow may authorize recordation with the title company.
Once the escrow company has called to “set-up” the recording, the title company confirms receipt of all documents, funds and statements of information and transmits the documents to the county recorder for recordation. At the same time, the title unit forwards all demands, title fees and taxes due to the title company sub escrow department. Upon confirmation of recording, the sub escrow department pays off the demands and taxes and collects the title fees from proceeds, forwarding the remainder to the escrow company.
Important things to remember
- It’s good to review funding requirements with your lender and/or escrow as early as possible. This will allow both the title and escrow to timely assist you in clearing some of those “last minute” issues. (again escrow and title do this without buyer involvement generally speaking)
- Make sure that any wiring of funds is confirmed (on the phone) with the escrow company. Wire fraud has become a significant problem and generally happens at the end of escrow. **On this note if wire transfer information is sent by the escrow company (or especially if they change) make sure to confirm on the phone with the escrow company.
- Statements of information MUST be sent to your title company BEFORE funding of the loan. The sooner title gets this information, the less likely you are to have a funding day problem
- If your transaction involves a “credit line” being paid off, review the lender’s requirements for payoff. Most often, this type of payoff will involve a letter that must be obtained from you and your credit line lender. Lenders will not “freeze” these accounts without receiving this letter and title companies cannot pay off accounts that are not “frozen” (unfrozen accounts can still be accessed by the borrower).
- If you have any questions or concerns about post funding matters, contact your title or escrow officer. When working with knowledgeable and experienced professionals, and, with a little patience, most problems can be quickly resolved.
- FHA payoffs require that the lender being paid off received the entire payoff amount on or before the first of the month. If your transaction closes on a Friday, at the end of a given month, your title company will compute and collect the next months payment as part of the payoff. The reason for this is that the receiving lender generally has a “cutoff” time for receiving payoff wires. Especially with those transactions involving payoff of an “East Coast Lender”, there is no guarantee that, even though the wire may be sent out early onthe following Monday, the lender will receive the payoff funds before the cutoff time. As an alternative, you may request that your title company “hold” this additional month’s payment pending verification of the payoff lender’s acceptance of the wire as full payoff of the loan. In this circumstance, the sub escrow department will confirm acceptance of the payoff and, if accepted, will forward the funds held to escrow for disbursement. If this is an option you wish to exercise, let your escrow company know prior to funding so that they can then properly advise the title company prior to close. We hope that this information will help you to understand some post closing procedures and problems that may occur after funding.
As always, if you have any questions, please contact your escrow or title professional.
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