A closing statement is an accounting, in writing, prepared at the close of escrow which sets forth the charges and credits of your account. The items shown on the statement will reflect the purchase price, the funds deposited or credited to your account, payoffs on existing encumbrances and/or liens, the costs for all services, and a determination of the funds you are entitled to at the close of the escrow. When you receive your closing papers, review the closing statement; it is extremely logical and reflects the financial aspects of your transaction. If anything does not make sense to you, you should ask your escrow officer for an explanation.

When going through your closing papers, examine all of them; there may even be a refund check hiding in there. Cash the check quickly, please. Be sure to have the check properly endorsed. All payees must endorse the check. This will eliminate the check being returned unpaid due to irregular or missing endorsements.

Your closing statement and all other escrow papers should be kept virtually forever for income tax purposes.

Your accountant will need the information about the sale or purchase of the property. IRS and other agencies may require you to prove your costs and/or profit on the sale of any property. The closing statement will assist in this task.

Do not rely on your escrow holder retaining the escrow file so that you can “always call and get copies of the closing statement.” Most escrow holders will be destroying the files after the statutory retention period, usually five years. Maintaining and storing the closed escrow files is a costly endeavor to the escrow holder. Therefore, a nominal fee may be charged by your escrow holder for the retrieval of a file from storage, photocopying the requested documents, and returning the file to storage.

Escrow fees are not regulated by the State. Escrow holders, like any other businesses, will charge fees that are commensurate with the costs of producing the service, the liability undertaken, and the overhead expenses which include a profit factor. Therefore, the fees will vary between companies and from county to county. Normally, the escrow holder will follow its minimum fee schedule, which will provide for extra charges based upon the differing elements of your escrow. On occasion, an additional fee will be charged for unusual expenditures of time on a given transaction.

The escrow holder has no control over the costs of other services that are obtained, such as the title insurance policy, the lender’s charges, insurance, recording charges, etc.

Your escrow officer, upon request, can provide you with an estimate of the escrow fees and costs as well as fees charged by others, provided such information is available.

No escrow is opened with the intention that it will cancel, but there are occasions when a contingency cannot be met or when the parties disagree during the pendency of the escrow. Some escrow holders provide for such an event by incorporating an instruction in the typed or printed general provisions.

Ordinarily, an escrow holder will take the position that no funds on deposit can be refunded until the escrow holder is in receipt of mutual cancellation instructions signed by the principals. The escrow holder cannot normally make a determination as to who is the “rightful” party in a dispute on a cancellation and therefore will not return the funds or documents until the principals agree. The escrow holder is not a judge.

Do expect to be charged a cancellation fee, as this is a charge for professional services rendered and quite often for several out-of-pocket expenses that have been incurred on the client’s behalf. These fees can vary from company to company depending upon their policies.

Sometimes when a dispute exists, the escrow holder may be forced to allow a court to decide which party is entitled to what documents or funds; this is called an interpleader action. Fortunately, most disputes are resolved before the interpleader is filed, as the costs for such legal actions are extreme. Those costs, incidentally, are normally paid out of the funds on deposit in the escrow.

Title insurance is usually obtained when real property is purchased. The policy of title insurance ensures the owner and/or the lender of ownership of the property. There are various coverages afforded, but a basic policy ensures that the buyer is the owner and that any lender shown on the policy is an insured lender. Many different types of extended coverages are available; for example, an ALTA policy is quite often required by an institutional lender to afford them additional protection under the title insurance policy. The title policy is written after an extensive examination of the public record is made and the recording of the required documents as called for in the escrow.

The title insurance policy fee is a one-time fee paid at the close of escrow. The determination of who pays for the policy is not uniform from county to county in California. In some counties the buyer will pay, while in others the seller will pay. In other counties, the seller will pay for the lender’s title policy. But in almost every case, the question of who pays closing costs is a matter of agreement between the parties. Usually this agreement is based on the customary practice in your county or area. In the case of some FHA or VA transactions, the escrow officer must follow the guidelines as required by the lender and/or government.

The terms of your transaction and the resultant escrow instructions determine how the property taxes will be handled. If there is no mention of the proration of taxes, your escrow officer will not deal with any credits or charges for prorated taxes. However, if your escrow calls for a proration of taxes, there will be an item in your closing statement that will reflect either a credit or charge to your account. If the taxes are not paid (even though there has been a credit or charge against your account), the buyer is obligated to obtain a tax bill and pay the taxes. If the buyer does not have a tax bill with which to pay the taxes, you can request a bill from the tax collector and send a photocopy of the deed.

Supplemental property taxes is another concern of the buyer. Upon transfer of real property, a supplemental tax bill is generated. This is accomplished in cooperation with the county assessor and the county tax collector.

Shortly after the close of an escrow involving the conveyance of real property, the county assessor will request information about the property from the buyer. This information assists the assessor in determining the value of the property for taxation purposes. The escrow holder may have previously supplied some of the information at the time of the closing of the escrow via a preliminary change of ownership form that should accompany each deed when it is recorded.