Opening Escrow

The escrow comes in the real estate transaction process once the buyer and seller signs a purchase agreement. They are a neutral mediator that facilitates the real estate transaction to ensure the purchase closes smoothly and without issue.

OPENING ESCROW

The escrow officer receives an invite for the transaction/invites the buyer/seller into the transaction. Upon logging in/signing up, they will be brought to the Deal Room Dashboard, with the signed purchase agreement and escrow instructions already available on the File Library.

The following is then done in the first day of escrow by the escrow officer:

Create/Edit Escrow Checklist: If they have pre-created an internal checklist template on DealTrail, the escrow officer will be prompted to select which checklist template they would use for the transaction. If this is the first time the escrow officer will be using DealTrail, they will be prompted instead to create a checklist for the transaction

Setting up timelines: The escrow officer goes to the DealTrail calendar and sets up timelines for the escrow (target close of escrow, contingency deadlines, etc.). To do this, they select the dates on the calendar and click Add Event. They then enter the appropriate name for the event, and set single/multiple reminders for it, and finally click Add. The event would then appear on the calendars of all parties involved in the transaction and they would get an alert notifying that the event was added to their calendar.

Send Action Request for EMD: From the Dashboard, the escrow officer clicks on Send Action Request. They would then enter what the notification would be for (in this case, an alert to send the Earnest Money Deposit (EMD), together with the wire instructions), and select Buyer Room as the recipient. Once set, they would click on Send, and the buyer would receive the Action Request and the wiring instructions.

Folders: Folders will also be created for documents, such as Contingency Removals, Title Report, Inspection Reports, Loan Documents, and Closing Package.

WEEK 1

- Disclosures

The escrow officer sends over an Action Request to the Seller Hub for the Disclosures to be uploaded. The seller’s agent/transaction coordinator (TC) then assists with preparing the Seller Disclosure Statement and other disclosures, as well as supporting documents. These documents are then sent via DocuTrail for the sellers for signature, then to the Buyer Room for review.

- Ordering Title Search

The escrow officer will then order a title search to a title company by gathering basic information about the property (address, legal description, and the names of the current and previous owners) and send it to the title company. The title company then starts the search by accessing various public records about the property (county records, tax assessor's records, court records, etc.), the chain of title (the sequence of historical transfers of ownership for the property), as well as any existing liens and other encumbrances (mortgages, judgments, easements, encroachments, etc.). The legal description of the property is then compared with records to ensure accuracy and consistency. Any discrepancies are flagged for further investigation.

Once received, the escrow officer will examine title history and other information and findings provided by the title company, and will evaluate whether there are any issues that could impact the buyer's ability to obtain a clear and marketable title. These findings will be compiled and outlined in a Preliminary Title Report.

The escrow officer uploads the report on DealTrail by going to the File Library > clicking on Upload File > Selecting “Preliminary Title Report” on the “What type of file are you uploading?” dropdown > choosing the file from their device > Clicking on Upload.

- Loan Application

All files related to the buyer’s loan application such as the Title Insurance, Purchase Agreement and Escrow Instructions, as well as information about the property, will be accessible by the lender for use in the loan application. The lender would be performing appraisal on the property being purchased by this week.

WEEK 2

- Inspection Negotiations

By this week, the buyer would have been receiving reports from the inspections performed on the property during the first week of escrow. They would also have already reviewed the disclosure statements sellers have submitted during this time.

If there are any points of concern on the disclosures, or issues were found on the inspections; the buyer has the following options:

Repairs - Repairs may be requested from the seller before moving forward with the purchase. The buyer's agent would prepare a Request for Repair form on DocuTrail and send it to the buyer for signature. Once signed, the buyer's agent will be notified to send an email outlining the breakdown of repairs needed and the quoted price. When the email is sent, the Seller Room will get notified that the Request for Repairs and the related Inspection Reports are available for them to review and sign on the Deal Room. If they agree to the terms, the sellers will sign the document and DocuTrail will send it over to the Buyer Room; otherwise, they might respond by sending a signed Request and Response to Request for Repairs (RRRR) form, in which they can sign to agree, negotiate further, or back out of the offer.

Once an agreement has been reached, the buyer's agent/Transaction Coordinator would then prepare a Repair Addendum through DocuTrail outlining the repairs needed to proceed with the transaction. Once filled out, the buyer's agent will send it to the buyer for signature, then to the seller, and finally, the fully-signed addendum will be submitted to the Deal Room. The repairs should then be performed.

Request for Credits - Buyer may request for credits in lieu of repairs on closing. Once terms have been agreed upon, the buyer's agent/Transaction Coordinator would create an Addendum the same way as the first option, except the terms would be for a credit request instead. Once agreed upon by the seller, they would sign the form, which will automatically notify the escrow officer. The fully-signed addendum will also be automatically sorted into the Purchase Agreement folder.

Price Reduction - Buyer can also ask to reduce the price of the property to offset the issues found. The buyer's agent/Transaction Coordinator would create an Addendum requesting for this on DocuTrail, send it over to the buyers for signature and then to the sellers for review.

Back Out of the Offer - In case of cancellation of escrow due to inspection issues (provided that there is inspection contingency on the agreement), if buyer is still within their contingency period, the buyer's agent can then create a Cancellation of Contract on DocuTrail. It will be sent to the Buyer and then to the Seller for Signatures, then finally to the Escrow Officer who would then confirm and mark the Transaction on the Transaction Management Page as Canceled. This status will reflect on both the sellers and buyers room.

- Appraisal Completion and Negotiations

After 10-14 days, the appraisal for the home would have been completed. In which case, the lender will submit findings to the Deal Room.

If the property is appraised below purchase price, the seller and buyer side will then discuss on the Appraisal thread on the transaction feed whether the buyer shoulders the difference, the seller reduces the purchase price, or a combination. If seller and buyer cannot come to an agreement, the buyer is free to cancel the contract as long as they are within appraisal contingency period (if there's any) through filling out a Cancellation of Contract form on DocuTrail and having both buyers and sellers sign. DocuTrail will then send the fully-signed document to the Escrow Hub, who will confirm cancellation of escrow. The Transaction will then be marked as canceled on the DealTrail Transaction Management Page.

If an agreement has been reached, an Addendum will be prepared by the buyer’s agent on DocuTrail outlining what was agreed upon to resolve the appraisal issue. This will be sent to the buyer, then to the seller for signatures; and the fully-signed document will be added to the Purchase Agreement folder. The buyer’s agent will also prepare an Appraisal Contingency Removal form and have the buyer and seller sign. Upon full signature, the escrow officer will be notified, and they can mark Appraisal Contingency Removal as complete on their internal checklist.

If the property is appraised at purchase price, the underwriting process continues. The lender will notify all Rooms about this and the buyer's agent fills out a Contingency Removal form for the Appraisal. They then send it to the buyer and seller room for signatures, then DocuTrail will send it to the Deal Room File Library.

- Preliminary Title Report Review

Upon successful submission of the report, DealTrail will automatically sort it to a folder named Preliminary Title Report, and will notify the Buyer and Seller Hub that it has been uploaded and is ready for review.

If the Title Report found issues, the escrow officer will also coordinate with both parties to resolve them. This may include contacting the seller and the seller’s lender to resolve any existing liens against the property, obtaining releases. The escrow officer creates an Announcement on this in the Deal Room to discuss and work on resolving these issues, and a folder will be created on the Deal Room’s File Library labeled Liens and Encumbrances, which will be shared with the Seller Room for them to submit proofs that encumbrances in title have been resolved; for example, a Deed of Reconveyance from their mortgage lender confirming the loan against their property has been fully paid and all liens have been lifted.

WEEK 3

- Repairs Underway

By this week, repairs would be ongoing if it was requested and agreed upon during the negotiation period. If necessary, the buyer may need to request for extension on the inspection contingency. In this case, the buyer’s agent would prepare an Addendum outlining this request and have both the buyer and seller sign. Once fully signed, the escrow would be notified about this, and they would need to adjust the Inspection Contingency end date by going to the DealTrail calendar, clicking on the Event from the Upcoming Events list, selecting adjust date, and finally choosing the new date and clicking Save. This will send an alert to all rooms advising that the Inspection Contingency deadline has been adjusted.

- Contingency Removals

Contingency removals may also happen during this week. The buyer’s agent would prepare these contingency removals depending on what’s in the signed purchase agreement:

Loan Contingency

Inspection Contingency

Appraisal Contingency

Review Of Seller Documents

Preliminary Title Report

It will be then sent to the buyer and the seller for signature, in said order, then the fully-signed removals would be sent to the Deal Room via DocuTrail. Once received, the escrow officer will mark them as complete on their internal checklist.

- Clearance of Encumbrances In Title

Once all liens and other encumbrances have been resolved or if the title search did not find any issues with the property title, the escrow officer then orders Title Insurance and uploads it to DealTrail via the File Library, the same way as how they uploaded the Title Report, but instead of selecting “Preliminary Title Report” on the dropdown, they would select “Title Insurance Policy”. This will notify the Buyer Hub and the policy will be visible as well for them on the File Room page.

The buyer’s agent would also need to send a fully-signed Contingency Removal for the Preliminary Title Report via DocuTrail. Once received, the escrow officer will mark it as complete on their task checklist.

- Final Loan Approval

As the underwriting process moves forward from the appraisal stage, the lender may need other information like the Title Insurance Policy, which will be available for all rooms once the escrow officer has uploaded it to DealTrail.

Once the lender approves the loan application, they will upload the following documents on DealTrail to the Loan Documents Package folder on the File Library page:

Loan Documents Package (promissory note, mortgage or deed of trust, Truth-in-Lending Act (TILA) disclosures, and other legal agreements)

Instructions for Closing

A letter verifying that the funds for the loan are in place and ready to submit to escrow

The buyer’s agent will then prepare a Loan Contingency Removal through DocuTrail and send it to the buyers and sellers for signatures. Once signed, DocuTrail will send it to the Deal Room, who will confirm receipt and mark them as complete on their internal checklist for disclosures.

WEEK 4

- Final Walkthrough

On the final week of escrow, once all necessary inspections and repairs have been completed, the buyer’s side would schedule a Final Walkthrough on the property to confirm the repairs have been completed to the agreement’s satisfaction, or the condition of the property remained the same as the first inspection.

If the repairs were not completed to the buyer’s satisfaction, or if there were new issues found during the final inspection, the buyer’s side may request it to be redone/repaired and possibly extend inspection contingency. (refer to Week 2 - Inspection Negotiations)

If the repairs were done to satisfaction, or the property condition was confirmed the same as it was on the first inspection, the buyer’s agent prepares a Verification of Property Inspection (Buyer Final Inspection) on DocuTrail and sends it to the buyer and seller for signatures. The fully-signed document will be automatically submitted to the Deal Room, who will confirm receipt and mark Final Walkthrough as complete on the internal checklist.

- Confirmation of submission of all documents and negotiations

The escrow reviews the escrow checklist to confirm all items are completed. If there are items not yet complete and they have confirmed that it has not been submitted yet, the escrow officer clicks on the Send Reminder button next to the pending item, which will notify the Room responsible for submitting said requirement. The said Room then clicks on the notification, which will show them a prompt where they can upload the needed document/s. Once submitted, Escrow will be notified via the Deal Room Dashboard for confirmation, and they will mark the said item as complete.

- Closing Statements

Once all items in the escrow checklist have been completed, the escrow officer will now prepare the Closing Statement/HUD-1 Statement providing a breakdown of all financial transactions and costs associated with a real estate transaction. This includes:

Basic Information: The property, the buyer, the seller, and the transaction's date.

Loan Information: If a mortgage is involved, the statement lists details about the loan, including the loan amount, interest rate, and lender information.

Purchase Price: The total agreed-upon purchase price of the property is stated on the closing statement.

Prorated Items: Certain expenses are prorated between the buyer and the seller based on the closing date. These can include property taxes, homeowners association (HOA) dues, and utility bills. The statement shows how these prorations were calculated.

Closing Costs: The statement itemizes all closing costs associated with the transaction. These costs can include loan origination fees, title insurance premiums, appraisal fees, attorney fees, and more.

Prepaid Items: Any prepaid items, such as property taxes or homeowners insurance, are listed on the statement.

Escrow Funds: If the buyer is establishing an escrow account to cover future property tax and insurance payments, the amount required for the initial escrow deposit is indicated.

Seller Credits: If the seller agreed to provide credits to the buyer, such as for repairs or closing costs, these credits are listed on the statement.

Adjustments: Any adjustments made to the purchase price, such as credits from the seller for repairs, are detailed on the statement.

Total Settlement Charges: The total amount of all costs and charges associated with the transaction is calculated and displayed on the closing statement.

Cash to Close: The amount of money the buyer needs to bring to the closing table is shown. This includes the down payment, closing costs, and any other fees.

Funds Provided by Buyer: The sources of the funds that the buyer brings to the closing are outlined. This includes the down payment and any additional funds needed.

Funds Provided by Seller: If the seller is contributing any funds to the transaction, such as for credits or repairs, those funds are listed.

Total Amount Due: The total amount due from the buyer is calculated, including the cash to close and any other adjustments.

Total Paid to Seller: The total amount paid to the seller is calculated, factoring in the purchase price and any seller credits.

Prorations and Adjustments Summary: A summary section often provides a breakdown of prorations and adjustments made between the buyer and the seller.

This document will be submitted to both the seller and buyer room for signatures via DocuTrail. Once signed, the escrow officer will mark it as complete on the internal escrow checklist. This will prompt them that the transaction will move to the Closing Stage. The escrow officer clicks on Proceed from the prompt.

CLOSING OF ESCROW

- Reminder of the Target Closing Date

Once the escrow enters its closing stage, DealTrail will automatically notify all Rooms of the target closing date. If needed, the escrow officer may move this on a later time by going to the Calendar Page, selecting the Target Escrow Closing Date from the Events List, clicking on Edit, selecting a new date, and clicking Save.

- Payment of Fees

The buyer is also notified to pay off closing costs and other expenses associated with the home purchase, which may include the following:

Lender Fees: These can include origination fees, loan application fees, and points if the buyer is paying discount points to lower their interest rate.

Title and Escrow Fees: These cover the costs associated with the title search, title insurance, and escrow services.

Appraisal Fee: This fee covers the cost of the professional appraisal of the property's value.

Attorney Fees: In some states, an attorney might be involved in the closing process to review documents and ensure legal compliance.

Property Taxes and Prepaid Insurance: Buyers might need to prepay property taxes and homeowners insurance premiums.

Recording Fees: Fees associated with recording the deed and other documents with the appropriate government agency.

HOA Fees: If the property is part of a homeowners association, there might be prorated fees due at closing.

Transfer Taxes: Taxes levied by the local government for transferring property ownership.

Miscellaneous Fees: These could include courier fees, credit report fees, and other administrative costs.

Wire instructions will be provided by the escrow officer to the buyer by posting on the Buyer Room.

- Signing of Loan Documents

DealTrail will also remind the Buyer Hub to schedule a signing for their Loan Documents (either at the Escrow Office or via a mobile notary) via an Action Request. Once scheduled, it will appear on the Deal Room calendar and will send a notification to them as well. Since all documents are digitally stored in DealTrail’s File Library, the signing can be done digitally by tablet or phone.

- Funding of Purchase

1-2 business days after the signing of loan documents, the bank funds the remaining amount needed for the purchase. Once funds have been received, Escrow will notify everyone by announcing it on the Deal Room Dashboard.

- Recording of Deed at the County

Escrow now will record the transfer of ownership with the County where the property is located.

In case of an online recording, the escrow officer first makes sure that the deed is properly prepared and executed according to California's legal requirements. The deed should be notarized and include all necessary information, such as the names of the grantor (seller) and grantee (buyer), a legal property description, and any relevant attachments.

They would now login to the County’s preferred Electronic Recording Services Provider. Some popular providers include Simplifile, CSC eRecording, and ePN. The escrow officer then uploads the deed and other necessary documents, as well as information about the property.

They will be brought to a page where they can review the documents to ensure it is correct, and then pay the recording fees. This may vary depending on the document type and the number of pages. Finally, the escrow officer submits the file for recording.

The county recorder’s office will now review the submitted documents for compliance with their guidelines. If everything is in order, they will accept the documents for recording. This process may take from days to a week depending on the area.

The escrow officer will receive an email confirming that the deed has been recorded, together with the receipt and a copy of the recorded document with the official recording number. They would then upload the recorded deed to the File Room page under the Closing Package folder.

- Preparing and Sending the Closing Package

Once the deed has been recorded, Escrow will now prepare a Closing Package for all Rooms involved. The different rooms may receive different files in their respective Packages:

To the Seller:

Signed Closing Disclosure or HUD-1: This document outlines the final financial details of the transaction, including the seller's proceeds from the sale after deducting closing costs, fees, and any outstanding obligations.

Deed: The deed is the legal document that transfers ownership of the property from the seller to the buyer. A copy of the executed deed is sent to the seller for their records.

Closing Statement: The final closing statement provides a detailed breakdown of the financial transactions, showing all credits, debits, and adjustments related to the sale.

Any Additional Agreements or Addenda: If there were any specific agreements or addenda related to the sale, such as repair agreements or property disclosures, copies of these documents are provided to the seller.

Release of Liens and Mortgages: If applicable, the escrow officer ensures that any existing liens, mortgages, or other encumbrances on the property are released or paid off from the seller's proceeds.

Instructions for Funds Disbursement: If the seller is receiving their funds electronically, the escrow officer provides instructions on how to access and use the funds.

To the Buyer:

Signed Closing Disclosure or HUD-1: Similar to the seller, the buyer receives a copy of the signed closing disclosure or HUD-1, which outlines their final financial obligations and the costs associated with the purchase.

Deed: The buyer receives a copy of the executed deed, confirming their ownership of the property.

Closing Statement: The buyer is provided with a final closing statement, showing all credits, debits, and adjustments related to the purchase.

Title Insurance Policy: If the buyer is purchasing title insurance or if the purchase was made with a mortgage, they receive a copy of the title insurance policy, which protects their ownership rights and interests.

Any Additional Agreements or Addenda: Copies of any additional agreements or addenda related to the purchase, such as property disclosures or repair agreements, are provided to the buyer.

To the Lender:

Closing Disclosure or HUD-1: The lender receives a copy of the signed closing disclosure or HUD-1, providing them with information about the final financial aspects of the transaction.

Deed of Trust or Mortgage: If the buyer obtained financing, the lender receives a copy of the executed deed of trust or mortgage, which secures the loan against the property.

Title Insurance Policy: If the buyer obtained a loan, the lender typically requires a lender's title insurance policy to protect their interest in the property.

Loan Documents: The lender receives copies of all loan documents signed by the buyer during the closing, including the promissory note and any additional agreements.

Final Closing Statement: The lender may request a copy of the final closing statement for their records and verification purposes.

- Disbursement of Funds

These files will be compiled in a folder called “Closing Package”. An announcement will be posted once these closing packages are ready for viewing/download. Once the proper Closing Packages have been sent to their respective recipients, funds will be disbursed through the instructions provided by the escrow officer (included in the Closing Packages):

Net proceeds from the sale of the property are wired to the seller.

Any agreed-upon adjustments/credits are wired to the seller.

Commissions are distributed between the seller and buyer’s agents’ brokerage. The brokerage will then distribute it to the agents.

- Close Of Escrow

With all documents recorded and funds disbursed, the escrow process is officially closed. The escrow officer makes sure all of the internal closing checklists have been marked as complete, and the DealTrail dashboard will show a prompt confirming all requirements have been fulfilled. They click on Confirm, and the escrow is officially marked as closed.

DealTrail will show up a congratulatory banner for all Rooms commemorating the close, but the Rooms will remain open for follow-up communications and for retained access to all documents submitted and stored during the transaction.