Closing Buyer Escrow
Real property in most jurisdictions is conveyed from the
seller to the
through a real estate
contract. The point in time at which the contract is
actually executed and the title to the property is conveyed to the buyer is
known as the "closing". The closing on your Stockton home takes place when the deed to the property is recorded with San Joaquin county in which the home is
located. Approximately three to five business days before the deed is to record, the escrow company will contact you to sign all your
closing documents. Once complete, your lender will receive their documents and fund the loan for closing.
Location of Closing
The closing on your new Stockton home in northern California normally takes place at the
Escrow Company. We will confirm the date and
time with you when we set the appointment.
At closing, the documents necessary to convey your new Stockton home to you and close the loan from the
lender will be executed and delivered. In addition to these standard items, the lender, the
escrow company, and the
Realtors involved may require other documents to be signed. The principal documents typically include the following:
Grant Deed - The
grant deed conveys the home and lot to you, subject only to permitted exceptions.
Title Commitment - At or before closing, the title company will deliver to you a standard form for an
Affiliated Land Title
Association (ALTA) owner's
title insurance commitment to insure saleable title of your home to you in the amount of the purchase
price, subject to the permitted title exceptions that may be described in the purchase agreement. Review the title commitment
carefully. Discuss any questions with the title company. Within 60 days after closing, the title company mails a standard ALTA
owner's title insurance policy, insuring the title to your home in accordance with the commitment you received at closing. Keep
the title insurance policy with your other valuable papers.
Home Warranty Protection Plan
Home warranty protection plans may offer different levels of coverage. For example, by paying a higher annual premium, you may also cover things like
air conditioning, clothes washer and dryer and even
swimming pool equipment.
- The promissory note is from you, payable to the lender in the principal amount of the loan, plus interest. If you are putting less than 20% down, one-twelfth of your annual taxes and
homeowner's insurance will be added to the principal and interest payments to determine your total monthly payment.
Deed of Trust
- The deed of trust encumbers your home as security for repayment of the promissory note.
Certain customary items in connection with the property will be prorated to the date of closing such as prepaid expenses, or reserves required by your lender and
homeowner's association, if applicable.
Proration's of general real property taxes and assessments will be based on the current year's taxes and assessments or, if they are unavailable, on the taxes and assessments for the prior year.
The Final Number
The final cost figure is available near to the actual closing. Although a reasonably close estimate may be determined before the date of closing, the proration of several items included is affected by the closing date and cannot be calculated until that date is known.
Plan to bring a cashiers check made out in the name of the
escrow company to your signing appointment. In your planning, be sure to allow time
to arrange for and obtain these funds. In addition, please keep the following items in mind.
Real Estate Settlement Procedures Act (RESPA) provides you with many protections. Under this law, you can review the
settlement page that lists costs you are paying at closing one day before the signing appointment. Although these documents are
not negotiable and thousands of home buyers have signed them, you should read them.
- You need to provide proof of a
homeowner's policy from your insurance company. Your insurance agent should exactly what is
needed. We suggest you arrange for this at least three weeks before the expected closing date.
Realtor or Lender Issues
- The escrow company is not authorized to
negotiate or make representations on behalf of any of the parties involved in the
closing. Therefore please discuss any questions, agreements, or other details directly with your
Realtor or your
advance of closing.
Utilities - The seller will normally have the
utility service removed from their name at closing. You will need to notify all applicable utility companies of your move so that service is provided in your name. We suggest that you contact these companies well ahead of time to avoid any interruption in service.
It is common for a variety of costs associated with the transaction (above and beyond the price of the property itself) to be incurred by either the
buyer or the
seller. These costs are typically paid at the closing, and are known as closing costs.
Examples of typical closing costs might include:
Attorney (Lawyer) fees, paid by either or both parties, for the preparation and recording of official documents. The principals and/or lender may each be represented by their own attorney. Typically required by institutional/commercial lenders to ensure documents are prepared correctly.
(Typical costs in
San Joaquin County)
- Title service cost(s), paid by either party according to the contract but
typically paid 1/2 buyer, 1/2 seller, for title search,
title insurance, and possibly other title services. In some cases an
attorney may do the title search or the title service and attorney fees may be combined. Required by institutional/commercial lenders and often by the
real estate contract.
- Recording fees, paid by either party, charged by a governmental entity for entering an official record of the change of ownership of the property. Required by the
county for recording the deed.
(typically seller pays for recording deed and deed of reconveyance and buyer
pays for recording the deed of trust)
- Document or Transaction Stamps or
Real Estate Transfer Tax, (typically paid by seller in
San Joaquin County), charged by
The San Joaquin County Recorder, as an excise tax upon the transaction. Required by law.
- Survey fee for a survey of the lot or land and all structures on it, (normally
paid by buyer), to confirm lot size and dimensions and check for encroachments. Required by institutional/commercial lenders.
- Brokerage Commission, paid by the seller to a
Real Estate Broker, to compensate the Broker(s) involved in the sale for their services in marketing the property, finding a buyer, and assisting in the
negotiations. Brokerage commissions are usually computed as a percentage of the sale price, and are established in a listing agreement between the seller and the listing broker. The listing broker may offer Buyer Agents a portion of their commission as an incentive to find buyers for the property. Payment is required if real estate brokerage service was used. This is often one of the largest closing costs.
- Mortgage Application Fees, paid by the buyer to the
lender, to cover the costs of processing their loan application. In some cases, the buyer would pay the lender the application directly and prior to closing, while in other cases the fee is part of the buyer's closing costs payable at closing.
- Points, paid by the buyer to the lender.
Points are a form of pre-paid interest, charged by the
lender as an alternative to charging a higher rate of interest on the mortgage loan. One point equals one percent of the loan principal.
- Appraisal Fees, usually paid by the buyer (although occasionally by the seller through negotiation), charged by a licensed professional Appraiser. Many lenders will require that an appraisal be performed as a condition of the mortgage loan. The purpose of this appraisal is to verify that the sale price of the property (upon which the underwriting of the loan is based) is equal to or less than the fair market value of the property.
- Inspection Fees, paid by the seller, the buyer, or both., charged by licensed
roof, or other inspectors. Some lenders require inspections (such as termite inspection) to verify that the property is in
wood destroying pest free, which is necessary to assure that the property will retain the necessary collateral value to secure the
- Home Warranties, paid by either the buyer or the seller. Warranties are available on resale homes insuring major household systems against repair or replacement for the buyer's initial year of ownership. Sellers will sometimes offer these warranties as a marketing strategy, or buyers can elect to purchase them at closing.
Property Insurance, paid by the buyer but may be reimbursed by the seller. Lenders will typically require that a mortgaged property be insured at all times throughout the life of the mortgage, and will usually require that the first full year's property insurance premium be paid in advance by the buyer. If the buyer has not already paid the insurance company directly, this would become another closing cost payable at closing.
- Pro-rata property taxes, paid by the seller, the buyer, or both. Most (but not all) jurisdictions assess taxes on real property, which are usually payable at a specified date annually. Since all but a tiny fraction of real estate transactions close on a date other than this one specified annual date, most transactions must include an adjustment to assure that both the seller and the buyer end up paying their share of the annual property tax, proportionate to the percentage of the year that each has ownership of the property. Usually required by institutional/commercial lenders and by the real estate contract.
Homeowner Association Dues, paid by the seller, buyer, or both. If the property is covered by a Homeowner Association (HOA), the HOA will normally be funded by dues assessed against each property owner. Again, since the ownership of the seller and buyer are each fractional in the year of the transaction, there must be an adjustment made so that each owner pays their proportional share. Often required by institutional/commercial lenders and by the real estate contract.
- Pro-rata Interest, paid by the buyer but may be reimbursed by the seller. The monthly mortgage payment is calculated and payable on a specified day each month. If the closing does not actually fall on that specified date (which is usually the case), then an adjustment must be made to calculate the interest on the loan for the number of extra days until the first payment is due.
Other items in addition to the above may be common in some jurisdictions, and some transactions may include unusual or unique items as closing costs. In the United States, Federal law requires that all residential transactions financed by a mortgage have all closing costs documented in detail upon the standard
. This information must be provided to the principals but does not have to be sent to the government. Instead a Declaration or Statement by Buyer and/or Seller is often required to be provided to the government office recording the deed. Form 1099-S may be required to be sent to the United States Internal Revenue Service, but Federal law does not allow a charge for this.
Suggested Buying Real Estate Books