Escrow: Now What?
Congrats on your journey to becoming a homeowner! Follow these recommendations (alongside guidance from your Realtor) to ensure a smooth escrow and settlement process.
When purchasing your home, you'll need to provide a down payment. The amount is flexible depending on your mortgage, but remember that a larger down payment reduces the time to pay off your home and lowers monthly mortgage payments.
During this period, engage an independent escrow or settlement company to manage the funds' transfer and facilitate the acquisition of your new home's deed. They'll handle your deposit and oversee various activities during escrow. Consider maintaining sufficient funds in your account to cover the deposit check.
Once the sale is finalized, your deposit check will be cashed and applied to the home's purchase price. You may receive your deposit back (minus cancellation fees) if the sale falls through. The seller might retain the money as liquidated damages in specific situations. Discuss the inclusion of a liquidated damages clause with your counsel before signing a purchase contract.
The escrow period usually lasts around 30 days, but it can vary. Within this timeframe, ensure that all contract requirements are satisfactorily fulfilled. Upon entering escrow, you and the seller agree on the closing date and contingencies. While each contract differs, most include the following:
- Inspection contingency: Arrange for an inspection promptly after signing the purchase contract to address any unsatisfactory results that may lead to contract cancellation.
- Financing contingency: You have a designated period to secure funding after signing the contract. If you can't obtain financing within the given time (and the seller won't grant an extension), you must decide whether to remove the contingency and take a chance to obtain a loan or cancel the contract.
- Marketable title requirement: Review the title report with an attorney or title officer to ensure clear ownership without legal complications. Comply with local and state property transfer ordinances.
- Obtain homeowner's insurance: This insurance is usually mandatory before closing the sale. Factors like fire and earthquake coverage may necessitate additional time for securing the policy. Apply for insurance soon after signing the contract.
- Contact local utility companies: Schedule service activation upon closing escrow.
- Schedule the final walk-through inspection: Verify that the property matches the contract's specifications. For example, the seller may have replaced a chandelier you expected to be included with a different fixture.
Congratulations on successfully closing the sale! You're now the proud owner of a new home. Well done!
