Escrow: Now What?
Congratulations, you are on your way to owning your very own home! Follow these suggestions (and your Realtors's advice) so that escrow and settlement with go as smooth as possible.
So you've found a home, submitted an offer and the seller has accepted. One of the very first things you will be doing after going under contract is to make your escrow deposit. This amount of this escrow deposit should of been established in the details of your offer and typically ranges between 1% of the home's sales price and can go as high as you the buyer are comfortable with. The higher the amount the more serious you look in the eyes of the seller. Just keep in mind that if you back out or default on the contract for a reason outside of one of the contract contingencies, this escrow deposit can be lost to the seller. Your agent should explain these details to you prior to submiitting an offer.
During this period after going under contract, you are going to need an escrow or settlement 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. In our area the seller will usually select the title/closing company and in return the seller will be paying for a owner's insurance title policy on your behalf. This policy averages about $5.75 per $1k of the sales price. Again, typically paid by the seller. This escrow or settlement company will hold your deposit and coordinate much of the activity that goes on during the escrow period. This deposit whether it be a cashier's check or a wire, will held by the settlement agent. Make sure that there are sufficient funds in your account to cover this check.
The deposit check will utlimately be cashed and assuming the sale goes through, this money will be applied towards the purchase price of your new home.
1. 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 after the contract to purchase is signed as unsatisfactory results of the inspection may mean that you will want to cancel the contract.
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 cancel the purchase contract.
3. A requirement that the seller must provide marketable title. With an attorney or title officer, review the title report. The title must be "clear" to ensure that you do not have legal issues regarding your ownership. Check into local and state ordinances regarding property transfer and make sure that you and/or the seller have complied with them.
4. Secure homeowner's insurance. This will be required before you can close the sale. Depending upon the home's age some insurance companies may require a 4 Point Insurance Inspection so obtaining this insurance may require a couple weeks to bind. It would be in your best interest to apply for insurance as soon as possible after the contract is signed.
5. Contact local utility companies to schedule to have service turned on when you close escrow.
6. Schedule the 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!