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Closing Instructions

What are Closing Instructions?
The closing instructions serve to engage the closing company with the parties of the real estate transaction. The closing company agrees to provide settlement services in connection with a transaction for the sale and purchase of a property. The parties who engage are the buyers and sellers. The documentation authorizes the closing company to obtain information necessary for the closing. The closing company in turn agrees to prepare, deliver and record all documents, excluding legal documents, necessary to close the transaction.

Who Provides the Closing Instructions?
Typically the company that will be ultimately responsible for closing the sales transaction will put the closing instructions together. In most transactions, the company responsible for closing the transaction is the title company. There are also brokers that provide these services as well.

If the broker is performing the closing services, including preparation, delivery, delivery and recording of closing documents and the disbursement of funds, the broker is the "Closing Company," and thereby is responsible for completing the Commission-approved Closing Instructions at the time that the Contract to Buy and Sell Real Estate is executed by the buyer and seller. According to Commission Rule E-4 and C.R.S. 12-61-113 (i), the broker shall retain a copy of the Closing Instructions for future use or inspection by an authorized representative of the Real Estate Commission.

If a title company is performing the closing services and is the "Closing Company", the Division of Insurance requires that the title company completes the closing instructions. The broker should make a reasonable effort to obtain a copy of the instructions from the title company for the broker's transaction file to ensure compliance with the Commission Rule as stated above.

An agent may also prepare the instructions. They need to provide a copy of the Closing Instructions to the title company for signature. Signed closing instructions are required before any settlement services can be provided.

Items Included in the Closing Instructions
There are a variety of items disclosed in the closing instructions which include:

  • Parties Involved: Buyer, Seller, Closing Company
  • Closing Fees
  • Disburser of funds
  • Seller's Net Proceeds: How they will be received (cashier's check, wire transfer or Closing Company's trust account check)
  • What the Closing Company can obtain for the transaction
  • What the Closing Company will prepare, disburse and record regarding the real estate transaction
  • Earnest Money: information on release of Earnest Money and what to do in case of an Earnest Money dispute. This information is disclosed to match up with paragraph 24 of the contract. It is critical that the title company receives completely signed Closing Instructions at the time of depositing an Earnest Money check if they are holding the Earnest Money.
  • Withholding for tax purposes
  • Any other Additional Provisions

Disclaimer: This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is distributed with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal or accounting advice or other expert assistance is required, the services of a competent professional should be sought.
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