Everything you need to know about COE meaning (real estate)

The process of buying or selling property can be complex, often filled with jargon and technical terms that confuse many people. One term commonly encountered in real estate transactions is Close of Escrow or COE. If you’re unsure about its meaning or significance, this blog is for you. We will explore the COE meaning in real estate and how the process takes place. 

What is the COE meaning in real estate?

COE stands for Close of Escrow in real estate. It’s when a property sale is finalized, and ownership transfers from the seller to the buyer. The COE date is set in the purchase agreement, marking the end of the escrow period where the buyer’s funds are held until all sale conditions are met. At COE, the buyer usually gets the keys, and the seller gets the proceeds. 

Simply put, COE marks the point where the home seller loses ownership of the property and possession rights, while the home buyer gains the right to use and occupy the property. In the world of real estate, understanding COE is crucial to ensuring a smooth transaction and avoiding unnecessary delays.

What are the types of COE?

Buyers and sellers need to grasp the COE distinctions as they can affect their rights and obligations during the transaction.

COE can be of different types:

• Actual COE: Marks the exact day and time when ownership transfers.
• Constructive COE: Assumes ownership transfer on a set date, even if the actual transfer happens later.
• Equitable COE: Grants the buyer equitable title before legal ownership transfer, upon meeting contract terms.

How important is COE in real estate?

COE is crucial in real estate for several reasons. Firstly, it marks the official end of the sales process, finalizing the transaction. Secondly, it signifies the transfer of ownership. The title is officially transferred at the County Recorder’s Office and the keys are handed to the buyer upon confirmation of recording. Lastly, it involves the disbursement of funds according to the escrow instructions and the Final Settlement Statement. It ensures that all relevant parties receive their funds.

Knowing the COE date is crucial for planning your move, closing your loan, and making other life arrangements. You must always consult with your real estate agent or real estate attorney to know about specific legal requirements for COE.

How does COE impact homeownership costs?

The Close of Escrow in a real estate deal can impact property taxes and ongoing costs of property ownership in several ways:

• Property taxes: The buyer typically pays their share of property taxes from the COE date for the rest of the tax year, based on local rates and the length of the tax year.
• Homeowners insurance: Buyers need to secure homeowners insurance by the COE date, as it marks the start of the coverage period, especially if they’re financing the purchase.
• Homeowner association fees: For properties in HOAs, buyers start paying their portion of fees and assessments from the COE date, including monthly dues and special assessments.
• Utilities: Buyers must transfer utilities to their name and clear any outstanding bills before the COE date to avoid issues.

What happens on the Close of Escrow day?

On the day of the COE, both buyers and sellers will need to sign various documents such as the deed, bill of sale, and loan papers. The buyer’s lender typically wires funds to the escrow company, and the seller receives payment. The escrow company ensures all funds are in and documents are signed before finalizing the transaction. Documents such as the deed are recorded with the county or local government post-COE. Possession of the property may transfer immediately or later as per the purchase agreement terms.

What documents are involved in the COE process?

The parties sign several key documents. These include:

• Closing disclosure summarizing financial details such as purchase price and closing costs.
• A deed transferring ownership from the seller to the buyer.
• Bill of sale detailing personal property such as home appliances.
• Settlement statement recording financial transactions during closing.
• Loan documents if the buyer is financing through a home mortgage.
• Title insurance policy protecting the buyer against title defects post-sale.
• Escrow instructions that guide the escrow agent in handling financial transactions and property transfers.

What happens when either the buyer or seller overshoots the COE date?

Both parties must prioritize meeting the COE date and communicate effectively with each other to mitigate the risk of legal or financial consequences. In case any of the parties miss the key date, there could be different outcomes:

Default: If the buyer misses COE, they might breach the agreement, allowing the seller to cancel the deal and keep the earnest money deposit (EMD). This deposit is made by the buyer to show serious intent to purchase that property and is held in an escrow account until the closing of the sale.

Extension: Both parties can agree to extend the COE date, requiring amendments and additional paperwork.

Penalties: There may be fees or penalties outlined in the agreement for missing COE.

Litigation: Legal action may occur if one party believes the other breached the agreement.Negotiation: Parties may negotiate to salvage the deal despite the missed COE, perhaps by adjusting fees or the sale price.

What may cause a potential delay in closing the escrow account? 

Buyers and sellers should collaborate closely with their real estate agents, lenders, and other professionals to identify and address potential issues early to minimize COE delays.

These delays could be due to several reasons.

• Financing issues: The borrower may face difficulty securing financing. Or, the loan lender may request more documentation.
• Home inspection issues: Problems found during home inspections may need negotiation and repair. 
• Title issues: Clearing title problems such as liens or easements could delay COE.
• Contingencies: Resolving home sale contingencies involving selling the buyer’s current home may take time.
• Paperwork delays: Signing loan documents or other paperwork delays could push the COE date.
• Natural disasters or unforeseen events: Events such as hurricanes or earthquakes may affect the property and could cause COE delays.

FAQs

When should a buyer conduct a home inspection vis à vis COE?

A home buyer must schedule the final walk-through 5-7 days before the COE. The real estate agent points out any repairs or changes since the time the purchase agreement was signed. It’s important not to skip the final walk-through of the property. It ensures all agreed-upon repairs are completed, and the property is as expected before finalizing the sale.

When is COE typically scheduled in a real estate sale?

COE usually happens when all conditions in the purchase agreement are met, and funds are deposited into the escrow account. It usually occurs within 30 to 45 days after signing the contract.

How long does the COE process usually last in real estate?

The COE process typically spans 30 to 45 days but may vary based on transaction specifics.

How does COE differ from the closing date?

While similar, the closing date is the agreed-upon date in the contract, while COE is when the transaction is finalized and recorded. 

Who coordinates COE in a real estate transaction?

Escrow agents and/or real estate attorneys typically handle COE coordination, with assistance from real estate agents and lenders.

Bottom line

Understanding the meaning of COE, which stands for Close of Escrow, is crucial for anyone involved in real estate deals. Whether you are a buyer, seller, real estate agent, or lender, knowing how the process unfolds and the potential hurdles that may arise can help ensure a smooth transaction. The closing disclosure plays a key role in this process, summarizing all financial details necessary for finalizing the deal. By working closely with your real estate team and staying informed, you can navigate the world of real estate with confidence, ensuring a seamless COE experience.

Written by Ramona Sinha. February 26, 2024

Ramona is the Senior Content Writer for Kukun. This experienced blogger uses simple and succinct words to decipher the complex phenomenon called life. She has written articles covering a broad range of topics, such as real estate, lending and mortgage, finance, business, taxation, home designs, home improvement projects, decor concepts, and more. An avid traveler, she’s a digital nomad at heart and an animal lover from the depth of her soul.