Best Practices: Closing Real Estate Loans: Escrow Closing vs. Table Closing

When financing an acquisition of real estate, the closing process will vary based on whether the transaction is consummated by way of a “table” closing or an “escrow” closing. Both closing methods are geographically tailored with the east-coast states typically following the table closing format, and the west-coast states utilizing the escrow closing procedure. The purpose of this article is to discuss the most common differences and nuances of each closing process and provide a brief guide on what to expect on the day of the closing. 

Just as the name suggests, an escrow closing is managed by a third-party intermediary, which will hold all funds in a separate bank account pending completion and review of all due diligence, relevant searches and the execution and recording of all closing documents. Such escrow services are generally provided by the title agent who’s facilitating the transaction or an independent third-party escrow company. As such, immediately prior to the closing, the title agent will confirm clear title to the real estate, as well as verify that all contingencies identified in the purchase agreement have been satisfied. Thereafter, following the recording of conveyance and security documents, the seller and other relevant parties (e.g., brokers, creditors, vendors, etc.) are paid by the escrow agent, and once all funds are disbursed, the escrow is subsequently closed. In the states that utilize the escrow closing process, it is not uncommon for parties to circulate the closing documents to all relevant parties for execution outside of a formal in-person meeting and fund at some later date.  

Conversely, the table closing process generally involves an in-person meeting at which the seller and the borrower execute the conveyance documents that transfer the title of the real estate to the borrower. If the conveyance is financed, all mortgage (or equivalent) and other loan documents are also signed by the borrower at the closing table, and funding is usually conducted that same day. It is not uncommon for lenders to not be present at the closing and, in jurisdictions that utilize the table closing process, most loans are closed by either a title agent, settlement agent or a closing attorney. It is also not uncommon to finalize any lingering issues at the closing table including the closing statement, broker fees, pro-rations, etc. As a result, a table-closing can be a time consuming process, but allows for disbursement of loan proceeds on the day of the closing, or shortly thereafter. Once the proceeds are disbursed, the borrower is granted access to the property and the transaction is concluded.

Ultimately, whether the closing is conducted through an escrow or a table-closing process makes little difference since both methods provide safeguards for all parties involved and convey new ownership of the real estate. However, depending on the jurisdiction or regional location, the closing process and logistics thereof may vary and parties to the transaction should become familiar with the process followed in the area that their closing is taking place to avoid closing delays.

For further assistance please contact the attorneys at Starfield & Smith, P.C. at 215-542-7070 or email us at info@starfieldsmith.com.