Understanding the Closing Process

In Colorado the closing of a sale or refinance transaction is typically performed by a licensed title company. A title company is viewed in this overall closing process as disinterested third party, and also referred to as a settlement agent. Colorado’s real estate closing practice is known as a table funding process, which means the seller, seller’s agent, buyer, buyer’s agent, attorneys and lender, together with a closer of the title company will all meet together to sign all the necessary documents and disburse the funds according to an approved settlement statement and/or HUD-1 statement.

All closing and settlement services shall be performed pursuant to written instructions (including the approved Colorado Real Estate Commission form) from all necessary parties, and in conformance with the Real Estate Settlement Procedures Act “RESPA”.

Regarding funding and disbursement practices, all title companies must comply with the Colorado’s “Good Funds Law” contained in 38-35-125, C.R.S. In particular, no title company that provides closing and settlement services for a real estate transaction shall disburse funds as a part of such services until those funds have been received and are either: Available for immediate withdrawal as a matter of right from the financial institution in which the funds have been deposited; or available for immediate withdrawal as a consequence of an agreement of a financial institution in which the funds are to be deposited or a financial institution upon which the funds are to be drawn. Any such agreement shall be made with or for the benefit of the person or entity providing closing and settlement services for a real estate transaction.

It is customary in Colorado that the closing fee for a sale transaction be equally split between the seller and buyer unless otherwise negotiated between the parties, with all other closing and ancillary service fees paid by the respective benefiting party.

The title company is responsible for preparing the necessary documentation and settlement statements and/or HUD-1 according to the written instructions and subject to state and federal laws and regulations. This process includes, but is not limited to the following:

• Receipt of the written sales contract, any applicable earnest money deposits and closing instructions
• All necessary communications between the parties to facilitate the transaction in accordance with the written closing instructions
• Maintaining security and accountability of monies owed and owing
• Ordering the title insurance commitment / policy
• Ordering a tax certificate that reflects the current status of real property taxes
• Request of a Homeowner’s Association “HOA” status letter regarding assessments and dues
• Ordering of all necessary payoff of existing loans affecting the property
• Calculate / prorate all payoff per diems, rents, taxes, assessments, recoding fees, commissions, water & sewer fees and all applicable loan fees and charges
• Preparing the settlement statements and/or HUD-1 statement
• Receipt and review of the lender’s loan package and closing instructions
• Coordination and receipt of all funds
• Presentation to the parties for explanation and execution of all required documents
• Notarization and necessary documentation for all required signatures
• Disbursement of funds pursuant to the settlement statements and/or HUD-1 statement
• Holding of any necessary funds pursuant to an escrow agreement for purposes of repairs or other obligations as agreed to by the parties
• Recording of all required documents with the appropriate Clerk & Recorder’s Office.
• Facilitate all loan payoffs together with the tracking of all necessary release documents to be filed with the respective county office
• Package and return the lender’s executed loan package
• Issuance of the final owner’s and lender’s title policies.

One should note that all real estate transactions are unique and the terms and conditions to each transaction may require additional services necessary to properly consummate the transactions.