A face-to-face closing is where all parties and their representatives meet at a specific place and time, usually at an office of one of the party’s representatives, to exchange the documents and to ensure that all necessary steps have been taken so that the buyer can receive marketable title and the seller receives his money. This type of closing is sometimes known as passing papers.

One person—the broker, an attorney, or a lender’s or title company’s representative—conducts the meeting.

When the documents are exchanged, they are recorded in the proper order so that the chain of title is not interrupted. For instance, the certificate of satisfaction must be recorded before the seller’s deed to the buyer. Only after the title is transferred to the buyer can the buyer pledge the property for a mortgage.

Because the requirements of settlement and transfer are stipulated by the sales contract and by law, the procedure of closing in escrow is basically the same as a face-to-face closing except that all of the documents are sent to an escrow agent, who is a disinterested third party, with no relationship to either the buyer or the seller or their representatives.

The main benefit of closing in escrow is that the parties and their representative do not have to meet—they just send the required documents to the escrow agent, who then examines to make sure everything is in order, then effects the settlement and transfer.

The escrow agent has the right to examine the title to ensure that there are no defects and that all conditions are satisfied. If everything is in order, the escrow agent sends the seller the purchase money, and records the deed for the buyer, and the mortgage, if any.

If the title has defects, the escrow agent will deduct the amount necessary to remove the liens from the seller’s money. If the title cannot be cured, then the agent will return everything to the senders of the material, effectively cancelling the sale.

If you have any questions about your current or future real estate transaction, call our team of attorneys at the Kendrick Law Group and Champion Title & Closing to learn more or to obtain one of our customized closing guides.