What Happens at Closing?

Closing is the completion of a sale of real estate. The buyer pays the sale price to the seller and the seller delivers a deed to the buyer. The closing agent sends the deed for recording with the county auditor to give notice to the public that the buyer now owns the property.

Usually, an escrow agent or closing agent collects the sale price from the buyer and the deed from the seller. When the deed is recorded, the escrow agent pays the sale price to the seller.

Often, the buyer borrows part of the purchase price from a lender, and the seller has a mortgage on the property. Usually, the earnest money agreement between buyer and seller provides that the seller will pay off their mortgage at closing. In that situation, the escrow agent collects the sale price partly from the buyer and partly from the buyer's lender, and pays the sale proceeds to the seller's lender to pay off the seller's mortgage and pays any funds left over to the seller. The escrow agent will also receive loan documents from the buyer's lender and have the buyer sign those documents. The escrow agent will then record the deed of trust or mortgage in favor of buyer's lender, to give notice to the public that the buyer's title is subject to the new loan document.

In addition to paying seller and seller's lender, the escrow agent will pay other expenses, including property taxes through the date of closing, real estate agents' commissions, Washington real estate excise tax (which is 1.78% of the sale price in most parts of King County), recording fees, buyer's loan fees, reserves for taxes and insurance for buyer's lender, title insurance, and escrow fees. These payments will be charged to whomever of buyer or seller is required to pay them under the earnest money agreement. These charges and payments are summarized in a settlement statement prepared by the escrow agent.

Buyers and sellers should ask the escrow agent to send them or their attorneys copies of the documents they will be asked to sign several days before the signing. This allows the documents to be reviewed more carefully, questions raised, and mistakes corrected before the meeting to sign the documents at closing.