EveryBody's Guide to the Law

ever, the price of your $225,000 house may have risen to $240,000 or more with the accumulated
back interest.
The Closing
After the purchase and sale contract is signed by both the buyer and the seller, you, as the
buyer, will need to do a number of things, including arranging financing, getting a title search
done (see discussion below), having termite and building inspectors check the property out,
obtaining insurance for the property, and perhaps having a survey done. As the seller, you may
have to make some repairs to the house or clear up some problems with your title (such as paying
the landscaper $250 to release the lien filed against your property).
Most contracts for the sale of real estate state that “time is of the essence.” This means that
escrow must close on the day and time specified, and not a minute later. If you won’t be ready
to close escrow on that date, call the seller or broker, let him or her know why you can’t close
escrow then, and state when you will be ready to close escrow. As long as you’re making a solid
effort to do what you have to do to close the deal, there shouldn’t be any problem getting a
reasonable extension of time to close escrow. Be sure to get the other party to sign a written
document agreeing to the time extension and file it with the escrow company. Keep a copy for
yourself in case a problem arises later.
When everything is finally in order, escrow will close. Several people may be present at the
closing, including the buyer, the seller, perhaps their attorneys, the real estate broker, the
bank’s representative, and someone from the escrow company. A number of things happen in
sequence. The buyer shows the bank the title insurance company’s report (discussed below)
and also proof of property insurance if this hasn’t been given to the bank already. The bank
lends the buyer the money to purchase the property. The buyer gives the money to the seller,
who in turn signs a new deed transferring title to the buyer, which is notarized by a notary public
(usually the person from the escrow company). The seller also pays off the balance of his or
her mortgage on the property. If a broker is involved, the commission is paid at this time.
Adjustments are made to reimburse the seller for various expenses that he or she has paid
already but that will benefit the buyer. For example, if the seller has prepaid the full year’s
property taxes of, say, $4,500, and there are six months left in the year, the buyer will give the
seller an additional $2,250 to adjust the taxes. A closing statement listing all monies, costs,
expenses, and deductions is prepared (usually by the escrow company or by one of the party’s
attorneys) and given to each party. The deed is then recorded in the county recorder’s office.
If the Sale Falls Through
When a sale falls through for some reason—if, for example you can’t get financing or your
building inspector finds a big crack in the foundation—you usually can cancel the sale and get
190 Everybody’s Guide to the Law