The Closing Process
What happens after a Contract is accepted?
The buyer and seller have agreed to a price, terms and a closing date. So what happens between that time and date of closing? We understand the home buying process can be a little confusing, so we've put together these steps to help you better understand what happens after the Contract is signed.
Step 1: Earnest Money Deposit - The buyer makes an initial deposit in an amount agreed upon between the parties, and those funds are placed into an escrow account as shown on the Contract. Some realtors hold the escrow deposit, and sometimes Coral Reef Title holds those funds pending the closing of the transaction.
Step 2: File Processing - When a signed Contract is received in our office, we begin gathering the necessary information to process the title order. We contact the buyers, sellers, realtors and lenders, if applicable.
Step 3: Title Search and Municipal Lien Search - We order the title search and municipal lien search. Sometimes these reports take 5-10 business days to obtain.
Step 4: Survey - We work with the buyer to order a survey of the property. Lenders require survey coverage on their title policy, therefore, a current survey (no less than 90 days old) is usually required with certifications to the buyer, lender, and title company and underwriter. Surveys take 5 - 10 business days to obtain. Buyers should review their Contract to determine appropriate time obligations to object to matters that may appear on the survey, and timely place the survey order. If a buyer is not obtaining financing, it is a good idea to order a survey. An owners policy can be issued without a new survey, however, the policy will exclude from coverage any matters that may appear on a survey of the property.
Step 5: Insurance - The buyer should obtain a dwelling policy, windstorm coverage and flood insurance to insure their new home. These coverages are required by all lenders, and buyers should expect to pay the first year premium prior to closing. Most lenders will require an escrow account to be set up at closing. After closing, the buyers monthly mortgage payments will include an amount to be placed in their escrow account to be used for the renewal insurance policies, and to pay the annual tax bill in November.
Step 6: Title Commitment - Upon receipt of the title and lien search, and the survey (if one was ordered), Coral Reef Title issues the Title Commitment. The commitment reflects the policy(ies) to be issued, (i.e. Owners and Loan policies), the Requirements to be met prior to closing, and the Exceptions from coverage. The buyer should review the title commitment in its entirety. A copy of the commitment will also be sent to the lender, if the buyer is obtaining financing)
Step 7: Clearing Title Issues - Coral Reef Title will work with the seller to clear the Requirements prior to closing. Usually the seller has an existing mortgage, therefore, it is necessary for us to work with the seller to obtain authorization to order a Payoff Statement. Sometimes real property tax payments are outstanding, therefore, we obtain the proper amounts to pay the tax liens at closing. If there are title issues that cannot be cleared prior to closing, we notify the parties of the pending issues that may delay closing.
Step 8: Preparation of Closing Statement and Closing Documents - If the buyer is paying cash and not obtaining financing, Coral Reef Title prepares the buyers and sellers closing statements and distributes copies to the realtors, and then the buyer and seller. We like to do this several days before closing to allow the parties to review the documents, and to give ample time to the buyer to make arrangements for the wiring of funds.
If the buyer is obtaining financing, we provide the lender with a listing of our fees and we calculate the proration of taxes and assessments. We only prepare the Seller Closing Disclosure, and provide a copy to the realtors and to the seller. The lenders are responsible for providing the Closing Disclosure to the borrower in advance of the consummation (closing), as per the TRID guidelines.
Step 9: The Closing (or consummation)!!- The day everyone has been working towards. The buyer has wired their funds and set up an account with the water and electric companies. The seller has packed and moved. If both parties are in the area, we coordinate times for each party to sign their respective closing documents. Due to TRID Guidelines, we are required to meet with the buyers alone to review their loan documents.
After we have obtained signatures from both parties and all closing funds are in our escrow account, we disburse the funds and record the Deed.
Congratulations to the Buyer and Seller! But our work doesn't stop at this point.
Coral Reef Title Company's function does not stop with the final settlement. The funds to payoff existing mortgages, taxes and liens must be sent out immediately to insure prompt delivery. The complete mortgage file must be properly copied and organized and returned to the lender on the same date as the closing. The legal documents must be recorded in the public records of Monroe County, located in Key West.
In approximately thirty days from the date of closing, the recorded documents are received back in our office. We again search the public records to confirm no other documents have been recorded between the date of closing and the date the documents are recorded.
At this time, the final title policies are prepared, signed and forwarded to the customers.
Still, we are not finished with the file. We must constantly stay in touch with the lienholders to be sure the final release documents are received and recorded. It can sometimes take some of the larger lenders 90 days to produce a Satisfaction of Mortgage. Although the document was not recorded with the Warranty Deed, we still issue the title policy free and clear of the mortgages and liens that were paid at closing.