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 commercial (non-residential) transactions. The following steps illustrate the traditional flow of the title and escrow process:
1. 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 to 30 percent of the time. In a 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.
2. The title and escrow provider is selected, usually by whomever issues the order.
3. An offer is made, and the title process begins.
4. The lender approves the buyer’s application and the buyer deposits funds (downpayment and fees) into open escrow.
5. The property is appraised.
6. 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.
7. 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 county or local recording offices.
8. 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. The borrower is legally permitted to select their own title company, but some lenders select a title insurance provider with whom they have a relationship, and many borrowers do not have a preference.
