Most people have no idea how escrow works. When an offer on a home or property is accepted, you officially enter escrow. To help better understand the process, this blog details the life of an escrow beginning with finding a real estate agent through getting your keys.
Starting the home buying process
There are a few steps in the home buying and selling process that must happen before you enter escrow. The first step is to find a real estate agent to list your home or to help you find one to buy. Once you’ve enlisted a realtor, you need to get prequalified by a lender to know what price point you can afford. A lender will also help identify loan options and programs available when it comes time to secure financing. While you can start looking prior, these first steps prepare you with the information you need to make an offer once you find a house or property that fits your needs and preferences.
Negotiating the purchase
All real estate transactions require some due diligence and negotiation. When you make an offer and it is accepted, one of the next steps is the inspection. If something is discovered during inspection, it may become part of your negotiation. You can ask the seller to pay for repairs or credit the selling price. Other negotiation points may include the closing date or renting the property back to the seller to give them time to move. Once the details are ironed out and agreed upon by both parties you will sign the contract and put down a deposit to open escrow.
The real estate agent will oversee the process and work with a title and escrow company to officially open escrow. At that time the purchase agreement and the buyer’s earnest money is placed into escrow. In simple terms, escrow describes the neutral third-party handling of funds, documents, and tasks specific to the closing.
There are a few primary documents that must be reviewed during escrow. The first of these is the title commitment, sometimes known as the preliminary report. This report outlines all the details and requirements for issuing title insurance on the property. It is also a promise that a title insurance policy will be issued after closing on the property. Depending on the details uncovered, there may be other information and paperwork requested. It is important to promptly respond to any requests, to ensure the escrow process can move forward smoothly. Fortunately, you are not on your own to figure all this out. Your real estate agent and the escrow officer handling the transaction are there to walk you through the process.
After all the documents have been reviewed and approved, you will sign the loan documents and the closing paperwork. The loan documents, invoices and other information will be packaged and sent to the funding lender. The closing paperwork consists of a document stating all the terms of your loan as well as documents stating all the agreements between the buyer and seller of the property.
Once all the documents are signed and received, the funds for the purchase of the home will be deposited via wire transfer. It is important to follow all the instructions carefully during the wire transfer process to avoid theft and fraud. Once the funds are received, the buyer will get the keys to their new home.
At Landmark Title, we have a knowledgeable team of title and escrow professionals available to answer any questions and help walk buyers and sellers through the entire escrow process successfully. Please contact us today to learn more about our services.