In last week’s blog we addressed the most common lender documents in a typical real estate loan package, including the ‘critical documents’, today we will look at some common escrow documents in the package in order to close the deal!
Settlement of the loan transaction is facilitated by a ‘Settlement Agent’ which could be an escrow or title company, or attorney. Each Settlement Agent has their own specific documents, and there will also be variations depending on which state the property is located in. Generally the lender prepares their documents and submits them to the settlement agent to be combined with the escrow documents for closing.
Settlement Statement – sometimes referred to as a closing statement, or ALTA, this document will include the new loan amount, purchase price if it is a new purchase rather than refinance, payoffs, fees, and credits will be itemized; and any funds due to or from the borrower will be disclosed. The date of closing and anticipated date of funds disbursement will be near the top of the first page. The settlement statement is also provided to sellers of real estate and will show the sale price of the property as well as funds they will receive at closing after all payoffs and closing costs have been paid.
Conveyance Deeds – if a property is being purchased/sold/gifted there will be a deed conveying the property form the grantor (seller) to grantee (buyer). The type of deed used varies depending on the state the property is located in, and the type of transaction. This document will name all parties involved, will include a legal description of the property being transferred, and will need to be signed by the grantor and notarized. Executed deeds are usually recorded with the county in which the property is located and are public records.
Escrow Agreement – this is a contract between the parties involved in the transaction which will outline the terms and conditions as well as the responsibilities of all parties. An escrow agent will hold funds received in escrow until all conditions are met and then deliver funds to the beneficiary. Generally, an escrow agreement will include the following information:
- The identity of the appointed escrow agent
- Definitions for any expressions pertinent to the agreement
- The escrow funds and detailed conditions for the release of these funds
- The acceptable use of funds by the escrow agent
- The duties and liabilities of the escrow agent
- The escrow agent’s fees and expenses
- The jurisdiction and venue in the event of a legal action
Funds Disbursement Authorization – if the borrower/seller will receive any funds at closing this document is usually included to allow selection of how to receive those funds. Most settlement agents offer options including the issuance of a check, wire transfer, deposit into another escrow account, and sometimes an ACH transfer. If a borrower owes funds at closing, they will receive instructions regarding paying via check versus a wire transfer- the amount due typically determines the required method.
Miscellaneous documents may be included depending on the specific transaction and location of the property. There may be an owner’s affidavit, an approval for the Title Insurance Commitment, broker commission disclosures, and tax related forms such as a 1099S. In WA, when a property is transferred, we usually see the Dept. of Revenue Real Estate Excise Tax Affidavit.
Hopefully this has given you a bit more insight of what may be included in your closing package.
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