What Does COE Mean in Real Estate?
COE or “close of escrow” means that both parties – buyer and seller – have fulfilled conditions in the homebuying contract and are ready to move the sale forward.
Close of escrow implies that all the closing documents and associated paperwork are signed and the homebuyer is ready to move into their new home. Therefore, COE represents more than just a transactional event; it marks the culmination of a series of steps that bring both parties closer to realizing their real estate goals.
However, COE might or might not be the final part of the home buying process, as the deal hinges on the closing date, which might or might not be included in the closer of escrow.
The closing date marks when all transactions are officially completed, implying that the deed of the property is signed over to the buyer.
If the deed of the property transfer has taken place, the close of escrow will mark the final step in the home buying and escrow closing process.
What Does COE Implies in Real Estate?
In real estate, COE carries significant implications for both the buyer and seller:
- For the Seller: Once COE is achieved, the seller is no longer permitted to entertain or accept counteroffers from other prospective buyers. This solidifies the commitment to sell the property to the existing buyer, contingent on the terms and conditions specified in the contract. In essence, COE grants the seller peace of mind that the sale is progressing toward its conclusion.
- For the Buyer: COE mandates that the buyer must diligently complete all necessary steps and requirements outlined in the contract. This includes fulfilling financial obligations, conducting property inspections, and reviewing and signing an array of essential documents. For the buyer, COE is the moment of realization when they must be prepared to take possession of the property in accordance with the agreed-upon terms.
Why Is COE Important in Real Estate?
COE holds significant importance for both the buyer and the seller. It can be summarized by the following:
COE Importance for Sellers
- Transaction Closure
COE is important for sellers as it marks the definitive closer of the transaction. As mentioned previously, COE signifies that all conditions have been met and the property is ready to transfer to the buyer, who becomes the new owner. This rests on the reassurance that the sale will proceed as planned.
- Property Off the Market
Another importance of COE for sellers is that the property will be effectively taken off the market. The seller will no longer be able to listen to new offers and counteroffers from buyers. This is significant because COE eliminates potential complications and allows the seller to focus exclusively on completing the sale.
COE Importance for Buyers
- Legal Protection
COE provides legal protection for buyers, as it signifies the seller’s commitment to transfer the property in the agreed conditions. As expected, COE reduces the risk of unexpected changes in the home-buying process.
- Financial Commitment
COE also signifies the buyer’s financial commitment to purchase the real estate property. By reaching close of escrow, the buyer demonstrates seriousness about acquiring the property, giving the seller a level of confidence.
COE (Close of Escrow) Process Steps Explained
Once the purchasing party signs the purchase agreement, the COE process can begin. Here are the steps involved and explained:
Step 1: Buyer Provides a Deposit
The first step is for the buyer to supply an earnest money deposit. This deposit is essential, as it shows the buyer is serious about purchasing the property. The deposit is usually 10% of the property’s total price.
Step 2: Approve the Property Disclosures
The property disclosure or seller’s disclosure is a legal document detailing the condition of the property and any defects the buyer should be aware of. The seller signs this document.
Step 3: Home Inspections and Appraisals
The third step is for the buyer to conduct a home appraisal to finalize the loan terms. A home appraisal helps evaluate the price of the property and lenders won’t usually give a home loan for an undervalued property.
After the appraisal, the buyer can ask for a home inspection, where official inspectors conduct a full property inspection. If they find any issues, the buyer can negotiate with the seller to either fix them or subtract them from the total price.
Step 4: Escrow Documents Reviewal
The fourth step is for both parties to review the official escrow documents. These include the transfer deed, bill of sale, the seller’s affidavit, signed mortgage deed, and other documents.
Step 5: One Last Look at the Property
Before the final step, buyers are advised to take one last look at the property or final walkthrough. The buyer gets the opportunity to determine if the house is in order and if any additional damages have emerged.
The final walkthrough ensures that the buyer gets what they agreed on with the seller.
Step 6: Signing the Documents
The final step is lengthy, where the buyer and seller sign the closing documents. These are your tax declarations, initial escrow settlement, deed of trust, etc. These documents are signed in front of the lender, closing agent, real estate agent, and any other legal representatives.
Once all documents are signed, the escrow agent presents the buyer with a deed of their new home.
When is the COE Deadline?
The COE deadline is a crucial aspect of any real estate transaction and is typically negotiated and specified in the purchase agreement. This date signifies when COE will occur, resulting from a mutual agreement between the buyer and seller.
The timeline for the COE deadline can vary widely depending on the specifics of the transaction, and it can be any of the following:
- COE deadline is typically set within 30 to 60 days after the offer has been accepted.
- COE can also be as short as 20 days and as long as 365 days. However, the latter is rarely the case in most real estate deals.
- If you plan on purchasing the property through financing, the COE deadline can depend on the lender, as they set the loan financing time frame. While it’s commonly suggested that most lenders accept a 45-day loan financing period, some lenders can go much shorter.
The specific COE deadline is one of the key negotiation points during the real estate transaction and is critical for ensuring a smooth and timely closing process.
Tips for Meeting COE on Time (For Buyers and Sellers)
Finally, here are a few tips to ensure both buyers and sellers meet COE on time:
- Prepare the Property: Ensure the property is in the agreed-upon condition for the final walkthrough and COE. Address any outstanding repairs or issues promptly.
- Complete Paperwork Early: Work with your real estate agent to complete all required paperwork before the COE date. This includes the transfer deed and seller’s affidavit.
- Be Responsive: Respond promptly if the buyer has any requests or questions. Delays in communication can slow down the process.
- Cooperate with Inspections: Allow access for buyer inspections and appraisals as soon as they are scheduled. Be ready to address any issues that arise during inspections.
- Coordinate Moving Plans: Have a clear plan for moving out of the property on or before the COE date to avoid complications.
- Stay Organized: Create a checklist of all the tasks and documents required for COE. Stay organized and keep track of deadlines.
- Promptly Provide Documentation: Provide all necessary documents to your lender and escrow agent. Delays in paperwork can slow down the process.
- Secure Financing Early: Start the mortgage approval process as soon as possible. Ensure you have a pre-approval letter before making an offer.
- Schedule Inspections Promptly: Once the offer is accepted, schedule inspections promptly. Any repairs or negotiations with the seller should be handled swiftly.
- Monitor Contingencies: Keep an eye on contingency deadlines, such as the inspection contingency or appraisal contingency. Request extensions if needed, but try to meet these deadlines.
That concludes this short guide on what close of escrow means. As you can see, the close of escrow means that both parties have signed all the necessary documents and have met all the conditions in the homebuying contract. It means they are one step closer to finalizing the homebuying process.
- What Does Closing Escrow Mean?
Closing escrow or COE means that the buyer and seller have met all the conditions and have signed all the documents in the homebuying process. Thus, the escrow agent can move forward with the sale.
- What Happens After Escrow Closes?
After the escrow closes, several things can occur. You might be given the keys to the property, obtain the title at a later date, or wait a few hours before you are officially the new owner of the house.
- How Long After Signing Loan Docs Does Escrow Close?
The average time between signing the loan documents and the escrow close is typically five days.