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Escrow

Your Path to Home Ownership
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Escrow

Once your offer is accepted, you go into escrow. What is escrow? It’s the period of time – from when your offer is accepted until you take possession of our home. Escrow is also a neutral third party that holds your deposit monies and legal documents and transfers funds on behalf of the buyer and seller. Escrow is a protection for both the buyer and seller to ensure that both parties meet all the requirements of the contract.

After entering into a contract of sale, the parties sign an escrow agreement which requires them to deposit specified funds and documents with the escrow company. The escrow instructions, which are taken from the Purchase Agreement, are prepared by an escrow agent.  Your deposit goes into escrow, where it will remain until the close of escrow and you take ownership of the property.

The escrow agent records the appropriate documents and gives each party the documents and money each is entitled to receive. If either party fails to fulfill the requirements of the agreement, the escrow is not closed.

What happens during escrow?

Property Appraisal

Property Appraisal. Your lender orders a property appraisal to determine the value of the property. The objective of the property appraisal is to provide an estimate of the current market value of the home you wish to buy based on similar homes recently sold in the neighborhood. (The appraiser is not inspecting the home for defects.) The lender will generally lend you up to a certain percentage of the appraised value of the property (loan-to-value ratio).

Title Insurance

Title Insurance. A title insurance company conducts a title search to make sure that the property is free of any legal claims against it. You will need to buy a title insurance policy that insures your lender for any loss caused by a discrepancy in title to the property. In addition, an Owner’s Title Policy protects your ownership interest in the property. Learn more with this helpful video.

Home Inspection

 

Home Inspection. Although you will probably examine the house you are planning to buy to the best of your ability, it is wise to have an expert inspect the property. The price of the inspection varies depending on the size of the home, but will be in the range of $500. It is generally well worth the cost!

 

    • The Home Inspection is not to be confused with the appraisal, which the lender requires in order to determine the market value of the home. The inspection evaluates the structural and mechanical condition of the property. It is helpful to be present during the inspection to learn more about the extent of potential problems and to understand the inspection report. Home inspections should include an evaluation of at least the following:
      • Foundations
      • Doors and windows
      • Roof
      • Plumbing and electrical systems
      • Heating and air conditioning systems
      • Inspection
      • Ventilation
      • Appliances

The results of the inspection report can give you a good indication of the repairs needed. Since this is typically one of the contingencies of your purchase contract, the report can help you negotiate an adjustment to the purchase price, get the seller to pay for needed repairs or enable you to get out of the purchase agreement and get your deposit refunded.

Homeowners Insurance

 

  • Homeowners Insurance. The lender requires that you purchase homeowner’s insurance which protects you and the lender from loss in the event the house is  damaged or destroyed. When you compare quotes from different insurance companies, be sure that you have been quoted rates for exactly the same types and amounts of coverage. Learn more here.

 

Homeowner’s Warranty Decision

 

Homeowner’s Warranty Decision. Often a homeowner’s warranty can be purchased, which covers repair of major systems during the first year of home ownership. Sometimes, the seller will contribute the cost of the Homeowner’s Warranty. It is not required.

 

Review Home Owner’s Association Documents

 

Review Home Owner’s Association Documents. When purchasing a condominium or a home in a planned unit development, it is important to recognize that you will be bound by CC&Rs (covenants, conditions & restrictions), The intent of the CC&Rs is to protect the value of the development, but can also impact how you use your property. Be sure to read these and the  Home Owner’s Association’s operational, insurance and financial documents. Learn more here.