What Happens in Escrow
Navigating Escrow: What Comes Next?
Welcome to the exciting journey of becoming a homeowner! In the process of securing your dream home, it's essential to follow these guidelines, in addition to heeding the advice of your trusted Realtors®, to ensure a smooth and hassle-free escrow and settlement experience.
Down Payment: As you embark on this homeownership journey, be prepared to make a down payment on your new home. The amount can vary depending on your mortgage terms, and it's entirely up to you to decide how much to put down. Remember, a larger down payment not only reduces the time it takes to pay off your home but also lowers your monthly mortgage payments.
The Role of Escrow: During this pivotal phase of buying your home, an escrow or settlement company will play a crucial role as an impartial third party. They will guide you on when and to whom your funds should be directed to secure the deed to your new property. Typically, the deposit check may be held by the escrow company, an attorney, or in the broker's trust account. It's vital to ensure that your bank account has sufficient funds to cover this deposit check.
Deposit Check Details: Your deposit check will be cashed, and if the sale successfully concludes, this amount will be applied toward the total purchase price of your new home. In the event that the sale does not proceed, you may be eligible to receive a refund of your deposit, less standard cancellation fees. Keep in mind that there are instances where the seller may retain this deposit as liquidated damages. It's advisable to consult with legal counsel before signing a purchase contract to determine whether including a liquidated damages clause is in your best interest.
The Escrow Period: Typically, the period "in escrow" lasts around 30 days, although it can vary. During this period, every aspect stipulated in the contract must be satisfactorily fulfilled. By the time you enter escrow, you and the seller should have agreed upon the closing date and any contingencies. While each contract is unique, common contingencies include:
a. Inspection Contingency: Conduct a thorough inspection as soon as possible after signing the purchase contract. Any unsatisfactory findings may prompt you to consider canceling the contract. b. Financing Contingency: Following contract signing, you have a designated timeframe to secure financing. If, for any reason, funding cannot be secured within the specified timeframe (and the seller doesn't grant a written extension), you must decide whether to waive the contingency and proceed with the loan application or cancel the contract. c. Marketable Title Requirement: Collaborate with an attorney or title officer to review the title report. The title must be "clear" to avoid legal ownership issues. Familiarize yourself with local and state property transfer regulations to ensure compliance. d. Homeowner's Insurance: Secure homeowner's insurance, which is typically a prerequisite before closing the sale. Depending on specific requirements such as fire and earthquake coverage, obtaining insurance may require some time, so it's advisable to apply promptly after signing the contract. e. Utility Services: Contact local utility companies to arrange for service activation upon closing the escrow. f. Final Walk-Through: Schedule the final walk-through inspection to verify that the property aligns with the contract's specifications. Ensure that any fixtures or features promised in the contract remain intact.
Congratulations! You've reached the finish line. With the successful closure of the sale, you are now the proud owner of your new home. This marks the beginning of an exciting chapter in your life. Well done!