What Is a COE in Real Estate and How Does It Work?

In real estate, “Close of Escrow” (COE) refers to the final phase of a property transaction. This period is when all conditions outlined in the purchase agreement are met by both the buyer and the seller. A neutral third party, an escrow holder or agent, manages the exchange of funds and documents until all contractual obligations are fulfilled. The completion of the COE process leads to the official transfer of property ownership.

Opening Escrow

The escrow process begins following the acceptance of a purchase agreement. A neutral third party, often an escrow or title company, facilitates the transaction. This entity establishes an escrow account, a secure holding place for all funds and documents related to the sale.

A primary action involves the buyer depositing earnest money into this account. This deposit, ranging from 1% to 3% of the home’s purchase price, demonstrates the buyer’s commitment. The escrow officer then distributes initial instructions and disclosures to all parties, setting the procedural framework.

During the Escrow Period

Once escrow is open, activities and verifications begin to fulfill the purchase agreement’s conditions. A title company conducts a title search, examining public records to confirm legal ownership and identify any claims or liens against the property. Following this search, title insurance is issued, protecting both the buyer and the lender against financial losses from undiscovered title defects.

If the buyer is securing financing, an appraisal of the property is ordered by the lender. A licensed appraiser assesses the property’s market value to ensure it supports the loan amount, safeguarding the lender’s investment.

Buyers arrange for home inspections to evaluate the property’s condition. Issues discovered, such as structural concerns or necessary repairs, are addressed through negotiations between the buyer and seller. These negotiations satisfy contractual contingencies, allowing the buyer to request repairs, credits, or withdraw from the agreement if major problems arise.

The buyer’s lender processes the loan application, involving an underwriting process. Underwriters verify the buyer’s financial information, including income, assets, and credit history, to assess risk and approve the loan. This financial review ensures the buyer’s capacity to repay the mortgage. As the escrow period progresses, the escrow officer prepares legal documents, including the deed for ownership transfer, loan documents, and closing statements, for review and signing.

Closing Escrow

The final stage of the real estate transaction, closing escrow, occurs once all conditions of the purchase agreement have been met. Both the buyer and seller sign the final loan documents and closing statements, after reviewing a Closing Disclosure provided at least three business days prior to closing. This document itemizes all the costs and credits associated with the transaction.

Upon signing, the remaining funds required for the purchase are transferred from the buyer and the lender to the seller. The escrow company then ensures the deed, which legally transfers ownership, is recorded with the appropriate county office. This recording process makes the change of ownership a public record, providing legal protection for the buyer’s interests. With the official transfer of ownership complete, the buyer receives the keys to their new property.