What is COE in Real Estate?

An Exciting Journey to Becoming a Homeowner

Introduction

Becoming a homeowner is an exciting milestone in anyone's life. The day you receive your keys and take ownership of your new home is a special moment. This process is often referred to as the "close of escrow" in real estate. In this article, we will delve into the details of what COE (Close of Escrow) means and answer some commonly asked questions, giving you the knowledge and confidence to embark on your house-hunting journey.

Understanding Close of Escrow

In real estate, the term "escrow" has various meanings. Most people are familiar with escrow as a place where monthly payments for property taxes, homeowner's insurance, and mortgage insurance are held. This type of escrow account is typically required for FHA or USDA loans and is commonly used by homeowners. However, there is another type of escrow to consider.

One common practice in real estate transactions is the use of an escrow account to hold various items until the deal is completed and mortgage financing is secured. When a buyer makes a deposit on a property, the seller agrees to allow the buyer time to arrange financing and conduct inspections, such as appraisals and other financial documentation. If all goes smoothly, the buyer and seller can finalize the deal within 30 to 60 days. This is when the close of escrow takes place, and the seller transfers the property to the new owner. The seller does not have to be physically present during this process; the transfer of ownership can be handled by a third-party escrow agent.

The Difference Between Close of Escrow and Closing Date

It's important to understand the distinction between the close of escrow and the closing date. Escrow closes when all the terms of the contract have been met by both parties. However, the exchange of the title may or may not happen on the same day. In some cases, the buyer may receive the title at a later date, which then becomes the official completion date. If this occurs before the close of escrow, the seller may not need to be present at the meeting.

What Happens During Close of Escrow?

The close of escrow may or may not happen on the day of the closing, depending on the circumstances. Regardless of when it occurs, several steps need to be taken to ensure a successful close.

• Buyer Provides Earnest Money Deposit: After signing the purchase agreement, the buyer provides an earnest money deposit. This acts as a down payment and shows the seller that the buyer is serious about the purchase. The escrow company holds the earnest money as a security deposit and assists in the transaction process.
• Approve the Seller's Disclosures: Sellers are required to complete a property disclosure or seller's disclosure document, revealing any known issues or incidents related to the property. It is recommended to hire a home inspection service, regardless of whether the seller provides a disclosure statement, to avoid any surprises.
• Complete Home Appraisals and Inspections: Lenders often require a home appraisal to determine the value of the property. The buyer may request repairs if any issues are found during the inspection. If the seller fails to make the necessary repairs, the buyer has the right to walk away from the contract.
• Review All Escrow Documents: Both the buyer and the seller need to review and sign the required documentation for the transaction. It is advisable to consult a real estate attorney or an experienced agent before signing these contracts.
• Take a Final Walkthrough of the Property: Buyers are recommended to conduct a final walkthrough of the property to ensure that all agreed-upon conditions have been met, and no additional damages are present.
• Meet and Sign the Closing Documents: The method of closing may vary from state to state, but it is common for both the buyer and the seller to be present. Legal counsel is encouraged to attend the closing. The buyer must provide cashier's checks for their down payment and closing costs.
• Ownership Transfer: Once the transaction is complete, the escrow company delivers the property deed to the new owner, and ownership is officially transferred.

Possible Problems During Close of Escrow

While the majority of escrow closings go smoothly, there can be some last-minute issues that arise. These can typically be resolved through the use of an escrow service. Common problems include:

• Document Delays: Missing documentation or problems with the property may cause delays in the closing process, requiring an extension of the closing date.
• Title Issues: A title search may uncover problems, such as outstanding debts, which can halt the sale until resolved.
• Contingencies: Contingencies require certain conditions to be met before the transaction can proceed. If these conditions are not addressed, the closing may be delayed. Waiving or renegotiating contingencies may resolve any issues.

After the Closing of Escrow

Even after the close of escrow, there are still a few steps to be taken to finalize the transaction. Buyers typically conduct a final walkthrough to ensure everything is in order before making the final decision to proceed. The lender receives the down payment, and closing costs are paid. Any earnest money is returned, and ownership of the property is transferred to the buyer, unless otherwise agreed upon between the buyer and the seller.

Frequently Asked Questions

• What does COE 3 mean? COE 3 stands for Escrow Closing plus three days. This is common for properties where the seller is still residing. It's important to note that until the escrow is closed and the buyer has the title, the seller has no guarantees and may need to vacate the property.

• What does possession timing mean in real estate? Possession timing refers to the date when the buyer takes physical possession of the property they have purchased. This is often referred to as "closure" or "finishing" and can occur a few weeks or months after the close of escrow.

• What is the Escrow Officer's Purpose? The escrow officer acts as an impartial third party, typically from the escrow company. They oversee any deposits or earnest money held in escrow and ensure that all contractual obligations are met.

• What happens if the loan doesn't come through by the close of escrow? If a loan falls through during escrow, the purchase of the property may not proceed. In such cases, the buyer may lose their deposit. However, if the contract includes a mortgage or finance contingency provision, the buyer can withdraw from the deal and potentially receive their earnest money or deposit back. Alternatively, an extension on the closing can be requested, or financing can be obtained elsewhere.

Closing escrow is an important step in the home-buying process, and understanding the process can provide confidence and peace of mind. By following these steps and being aware of potential issues, you can navigate the close of escrow with ease. Happy house hunting!

What Is Coe In Real Estate

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