Demystifying the escrow process
Many home owners can feel the process of buying a home is long, complicated and drawn out. The purpose of this is to provide a brass tacks explanation of this final stage for home buyers.
Let’s first breakdown what the escrow process is…
Simply put an escrow is how a real estate transaction is closed. The escrow agent oversees and coordinates the closing activities as a neutral third party between the buyers and sellers. They will coordinate completion of disclosures, titles search, insurance, inspections of the property, pest inspections, and more. The escrow agent may be an attorney, a title company, a trust company, or an escrow company.
We’ve broken it down into 10 steps so you’ve got a clear roadmap…
Under contract – After you and the seller have signed a purchase agreement, your agent with collect your earnest money and deposit it in the escrow account specified in the purchase agreement.
Bank appraisal – The bank that issued your mortgage will want to do a full appraisal of the property (in the event of foreclosure).
Secure Financing – You’ll already have been pre-approved for a mortgage. Now you will sign a document detailing your loan amount, interest rate, closing costs, and any other costs. This will constitute your loan commitment.
Go over the seller’s disclosures – you’ll get a written notification of issues with the property. They might have been disclosed in the listing, but it’s essential to go back through them and verify there aren’t any additions.
Get a home inspection – In a fiercely competitive market like this, a large percentage of people often bring a general contractor along to their home inspections during the early contingency period phase of a deal (we recommend this). Taking a proactive stand, to make sure any household issues are solved and all repairs are made before closing, is imperative. Need more information? Head over to our home inspection blog post: https://www.lukejonesre.com/single-post/2017/10/09/Getting-through-your-Home-Inspection-5-biggest-areas-to-pay-attention-to
Get insurance – you’ll need to purchase homeowners insurance, in addition to geographic specific coverage (flood or earthquake). This is a requirement until you’ve paid off your mortgage. Strategically look for the best price that provides the broadest coverage.
Get the title report – this will verify that no one other than the seller has rights to the property. If there are any issue with the title, the seller is required to fix it in order for the sale to go through or let you walk away.
Final walk-through – wise to take a final walk through to visually inspect for any new damage that might have taken place. This is also the time to inspect modifications the seller agreed to make in the purchase agreement.
HUD-1 form – This is your final statement of loan terms and closing costs. Do a comparison to the good faith agreement you signed (step 3). Look for any mistakes or new additions.
Closing – You will sign all necessary documents and a new deed with you as the property owner with be made. At this time, you’ll wire transfer or write a check for the down payment and closing costs.
If you’re about to get into contract and you want to be in safe hands, let us know. We’re here for you!