The buyers are excited! They got the call from the title company yesterday to come in for a 3 pm appointment to sign the closing paperwork. Showing up at the title company office, the look over their notes once again to make sure they brought everything: Driver’s licenses, a copy of their estimated HUD-1 settlement statement, and a certified check for the amount due. The buyers sit down with the closing officer, their real estate agent, and a large pile of papers to sign.
About 45 minutes later, all the documents are signed and notarized, their questions are answered, and their excitement begins to build again as Mr. Buyer asks, “Where are my keys?”
It’s not an uncommon scenario. The buyer has paid their money, or at least they’ve brought in their check, and now they want the house. But there are a few more things that have to happen before the transaction closes escrow and our buyer can get their keys.
First, let’s start with what close of escrow is. According to the Arizona Association of Realtors Residential Resale Real Estate Purchase Contract (Contract), Close of Escrow occurs when the deed is recorded at the appropriate county recorder’s office.
The title company releases the deed to record once all the terms and conditions of the contract have been satisfied. These include:
- The buyer signs all the loan related documents
- The buyer signs the deed
- The buyer provides closing and down payment funds
- The seller signs the deed and other closing documents
- The buyer’s lender provides purchase funds
- The seller’s lien holder(s) are paid
- The title company completes a check of the chain of title and ensures there are no involuntary liens or encumbrances on the property
So while the buyer should be very excited when they go to the title company to sign their closing documents, there are still a few more steps to take before the transaction closes escrow and the keys are released to the new owner.
Alex Casteel is owner of Casteel Real Estate Professionals, a real estate brokerage serving the communities of Mesa, Arizona, and the Phoenix metropolitan area. Alex is a Certified Distressed Property Expert and earned an MBA from the W. P. Carey School of Business at Arizona State University.
I also have a question. If the seller still has not vacated the property at close of escrow, what are my options for recourse?
While this is an extremely frustrating situation (I’ve had to deal with this on a couple of occasions), I’ve always been able to resolve it within 24 hours with no lingering issues. Civil communication is the key to success.
There are a couple of options:
1. If you discover PRIOR TO COE the possibility that the seller is not going to vacate the property on-time, then, working with your real estate broker, determine what is the best course of action, but do your best to not close escrow. Withholding the closing funds is a powerful motivator. And if it is a short sale, the seller is risking their short sale agreement with their lien holder, which may put them at risk for foreclosure and/or other actions. Again, a powerful motivator.
2. Should you find the seller in the property AFTER COE then the first step is to work with the buying and selling brokers to get the seller out of the property. Sometimes there is a simple misunderstanding that can easily (and inexpensively) be resolved. I would recommend that one concurrently work with a real estate attorney to begin aneviction. Fortunately, the eviction process in Arizona is relatively expeditious and inexpensive. An attorney can advise you what is best for your particular situation as well as provide counsel on how to mitigate your risks both financially as well as to your real estate. Do make sure that you have property insurance on your new home so in the unlikely event of damage to the home or to the occupants that you are covered.
Nice article. Thanks for the info.
In your opinion, may I ask what would typically happen if:
- Buyer signed all closing docs, including HUD
- Before the seller comes in to sign their documents, the buyer calls the title company, claims to have made a terrible mistake, and asks them to rip up the contracts and return their funds from escrow.
- Assume no new information about property – pure buyer’s remorse. For example, talked to family members and decided did not want to live in a 2-story.
My question is, what are the responsibilities of the Title company. Do they oblige the buyer? Do they call the seller and tell him the truth?
Thanks,
Seriously distraught in Florida!
Thanks for your response. Keep in mind that my expertise resides within the state of Arizona regarding Arizona real estate, so the practices in Florida may be different. I would recommend speaking with a competent authority in Florida for any specifics regarding your situation.
In Arizona, the title company works for BOTH the buyer and the seller and has equal obligation to both. Until the property closes, the escrow officer must follow the terms of the agreement, which serve as their written instructions, and any lawful instructions from either party. With the given scenario, the title company would be obligated to stop the transaction upon the buyer’s written instructions. As for communicating the reason, they would have to disclose the cancelation instructions from the buyer to the seller, but they are under no obligation to disclose any more–in fact, they may have a confidentiality requirement that would prohibit them from disclosing any private communications. Because all contingencies have presumably been met, the reason for cancelation, while frustrating, is irrelevant and I would expect any earnest monies to be released to the seller. Unfortunately, were your case in Arizona, it’s not closed until the deed is recorded.
I’m assuming you were the seller in this case. I’m sorry for the 11th hour cancelation and I wish you the best in your next transaction.