When you make an offer to purchase a home and it’s accepted by the seller, the transaction escrow process begins. A number of steps and actions are required to close escrow and settle the transaction. These tasks are part of the preliminary escrow closing, and play vital roles in the successful closing of your home purchase.
Sign Escrow Instructions
As part of the preliminary escrow closing, both the buyer and seller in a transaction must approve and sign the escrow instructions. Your escrow officer will provide you with these instructions, which outline key milestones that must be met during the escrow process. These may include items such as loan details, necessary inspections or appraisals, homeowners insurance requirements, and homeowners association requirements, depending on the property you’re purchasing. The escrow provider will be required to adhere to these instructions throughout the escrow closing process.
Obtain Preliminary Title Report
One of the first requirements of your escrow closing is receiving a preliminary title report. This report, sometimes called a title commitment, is an offer to issue title insurance from a title insurance underwriter. The preliminary report will list important details about the actual property you’ll be purchasing, including any known title defects, such as liens or other interests. The preliminary report will also disclose exceptions to coverage and any requirements that should be met before a title insurance policy can be issued.
Prepare Closing Documents
As part of the preliminary escrow closing, your escrow officer will need to prepare all the necessary closing documents for your transaction. These will likely include your mortgage documents, property deeds, natural hazard disclosures, real estate transfer disclosure statements, the bill of sale for the transaction, and appraisal documents. The process may require other disclosures or documents, depending on the state where you’re buying the property. If either party is unable to or delayed in signing these preliminary escrow documents, the transaction settlement could be delayed.
Furnish HUD-1 Settlement Statement
A major part of your preliminary escrow closing is the HUD-1 Settlement Statement. This document, which is universal in all states, outlines important information related to the transaction. The escrow provider will prepare the HUD-1 and provide it to the buyers and sellers within three days of the scheduled closing of the transaction. Any fees and charges associated with the transaction will be listed on the HUD-1, along with the party responsible for paying for each. The HUD-1 shows buyers and sellers the exact amount due from them, or due to them, at the close of escrow, letting them know exactly what funds are required to settle the transaction.
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