The exact flow of the Title and Escrow process depends on the type of transaction. In a resale transaction the buyer purchases property from a seller, usually with a mortgage loan. In a refinance transaction, the current owner obtains a new loan for the property. There are also other specialized transactions such as builder (new home) and commecial (non-residential) transactions. The following steps illustrate the traditional flow of the Title and Escrow process:
- The order is placed and categorized. An open order indicates the process has begun. A closed order indicates the transaction was closed. A cancelled order indicates the process was actively cancelled or never progressed. Cancellation occurs about 25-30% of the time. For traditional resale in many states, the seller’s real estate agent (or an attorney) issues the order ahead before the property goes on the market.
- The Title and Escrow provider is selected, usually by whomever issues the order.
- An offer is made, and the title process begins.
- The lender approves the buyer’s application and the buyer deposits funds (downpayment and fees) into open escrow.
- The property is appraised.
- The title process begins and a title commitment (or preliminary title report) is produced which consists of a preliminary insurance policy and any title issues that need to be addressed.
- If the title process results in a clear to close status and the appraisal comes through as expected, escrow work can conclude.This includes the creation of a schedule of fees, the signing and notarization of relevant documents, the disbursement of funds, and the recording of relevant documents in the various county offices.
- Finally, the title insurance policy itself is issued, consisting of the final commitment plus any changes that have taken place in the interim.
A traditional refinance transaction follows similar steps, except that there is no seller and the bank starts off the title search which makes it the controlling entity in choosing the title provider.