Escrow: Now What?
Congratulations, you are on your way to owning your very own home! Follow these suggestions (and the advice of your Realtor®) so that escrow and closing with go as smooth as possible.
During this period of purchasing your home, you will coordinate with an escrow or title company to act as an independent third party so that you know when and who to give your money to get the deed to your new home. The title company will hold your earnest money and coordinate much of the activity that goes on during the escrow period. This earnest money check can also be held by an attorney or in the broker's trust account. Make sure that there are sufficient funds in your account to cover this check.
Earnest Money: The earnest money check will be due and cashed usually within a few days of your offer being accepted. You can expect this amount to be around 1% of the list price as a rule of thumb, although it exact amount will be listed in the MLS and in the contract itself. Assuming the sale goes through, this money will be applied to the purchase price of the home. If for any reason the sale is not consummated, you may be entitled to receive all of your deposit back, depending on the terms of the contract and the date terminated.
The period that you are "in escrow" is often 30 days, but may be longer or shorter. During this time, each item specified in the contract must be completed satisfactorily. By the time you have opened escrow, you have come to an agreement with the seller on the closing date and the contingencies. Each contract is different, but most include the following:
1. Inspection contingency: this should be completed as soon as possible, usually within a matter of days after the contract to purchase is signed. The cost of inspection is a separate expense paid by the buyer and normally ranges from $400-$800 for a typical home, although it can be higher if specialty inspections or tests are needed. You may choose to terminate the contract if something comes up at inspection that cannot be resolved.
2. Financing contingency: Once the contract is signed, you have a period of time to secure funding. If, for any reason, you are unable to secure funding during the period of time granted to you by the contract (and the seller will not provide a written extension of time), you must decide whether you want to remove the contingency and take your chances on getting a loan. You may choose to terminate the purchase contract.
3. A requirement that the seller must provide marketable title. Review the title report provided by your escrow officer. The title company will ensure the title to your new home is "clear" to ensure that you do not have lknown egal issues regarding your ownership, such as liens. If anything is found, you will be notified.
4. Secure homeowner's insurance. This will be required by your lender a few weeks after going under contract. It would be in your best interest to contact you preferred insurance broker as soon as possible after the contract is signed.
5. Final walk-through inspection. At this time, you should make sure that the property is exactly as the contract says it should be. What you thought to be a "permanently attached" chandelier that would come with the property might have been removed by the seller and replaced with a different fixture entirely.
You've made it! Once the sale has closed, you're the proud owner of a new home. Congratulations!