Escrow: Now What?
Congratulations, you are on your way to owning your new NorCal home! Follow these suggestions (and the advice of your escrow officer and your NorCal Home Realtor®), so that escrow and settlement with go as smoothly as possible.
You will be asked for the down payment you contracted to provide on your purchase. You can choose to put down as much or as little as you want and can qualify for (depending on your loan program), but remember, the more you put down toward the total price of your home, the less time it will take you to pay off and the lower your mortgage payments will be every month.
During this period of purchasing your home, 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. The escrow or settlement company will hold your deposit and coordinate much of the activity that goes on during your escrow.
Pursuant to your purchase contract, your deposit check will be placed in escrow and cashed. Assuming the sale goes through, this money will be applied to the purchase price of the home. If the sale is not consummated, your purchase contract may entitle you to receive all of your deposit back. In certain instances, however, the seller may be able to retain some, or all of this money as liquidated damages. Prior to executing a purchase contract, it would be wise to discuss this with your agent and/or with your counsel regarding whether or not it is your best interest to have a liquidated damages clause as part of your contract.
1. The period that you are "in escrow" is often 30-40 days, but can 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. Review the title report that you'll receive from the title company. 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 probably be required by your lender before you can close the sale. Due to such requirements as special fire and earthquake insurance, obtaining this insurance may require a lengthy period of time, and can be problematic if the property's in a high fire zone. It would be in your best interest to apply for insurance as soon as possible after the contract is signed.
5. Get a Home Inspection. We recommend that you thoroughly inspect the property you're buying. Even if you decided to waive your inspection and even if you're buying a newly-built home, it's advisable to check it out. If your contract provides an investigation contingency, you may need to negotiate some repairs and/or credits with the seller to address any issues that concern you.
6. Contact local utility companies to schedule to have service(s) placed in your name when you close escrow.
7. 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, which most often maens in the same condition as the contract date, normal wear and tear during the escrow period accepted. Things you thought to be a "permanently attached" and included in the purchase agreement should still be there, as should any other items specified in your agreement.
It can be a long, stressful time for a lot of buyers but once your escrow has closed, you're the proud owner of your new home. Congratulations! If you have questions, submit the form below and we'll get back to you right away.
