Closing and Escrow

What is Closing on a property?

While Closing Escrow is part of the process of “Closing on a Property,” they are not the same thing and don’t necessarily happen at the same time. Closing on a house or property, also referred to as the closing date, refers to the point at which transfer of title, presentation of deed and the handing over of keys happens. Simply put, it is the completion, or closing, of the business matter.

States fall into one of two categories as to how real estate transactions are completed. In Escrow states, a closing agent, often an escrow agent or representative from a title company, completes the closing of a real estate transaction. In Attorney states, the presence of a license attorney is required and has control over the closing of the transaction. Arkansas is an Escrow state.

What is Escrow and how does it work during the closing process?

Escrow is a temporary arrangement in which a third party (generally the escrow agent, etc. mentioned above) holds assets such as earnest money or property on behalf of the two parties to the transaction. Once conditions of the agreement have been fulfilled, the third party then releases what is being held to allow completion of the sale.

What kinds of things can be “conditions of the agreement”?

When borrowing money to fund a purchase of property, also known as the mortgage process, this can include:

• Submission and examination of income documents such as pay stubs and employer information
• Listings of debt, lines of credit and other liabilities
• Income tax returns
• Financial disclosures regarding things such as large deposits that aren’t regular income
• Divorce decrees and settlement documents.

In essence, any of the purchaser’s financial information required during the loan approval process. Closing of escrow and the sale, of course, being contingent upon obtaining approval. Other elements of the agreement usually include:

• Appraisal of the property
• Home inspection and certifications such as termite protection and septic tank tests
• The Seller’s Disclosure regarding the condition of the property, defects, etc.
• Title search and insurance
• Repairs.

Once the two parties have fulfilled the conditions of the agreement (includes things such as title search, disclosures, appraisals and inspections, etc.), the third party releases the assets resulting in the Close of Escrow.