Escrow: What's Next?

Congratulations, you are progressing towards owning your very own house! Adhere to these suggestions (and the counsel of your Realtors ®) to ensure that escrow and settlement proceed as smoothly as possible.

You will be requested to make a down payment on the property you are purchasing. You have the liberty to put down as much or as little as you desire (depending on your mortgage), but bear in mind, the more you place down toward the total price of your house, the quicker you'll pay it off and the lower your mortgage payments will be monthly.

During this phase of acquiring your property, an escrow or settlement company will be needed to act as an impartial third party to guide you on when and who to give your money to in order to acquire the deed to your new house. The escrow or settlement company will hold your deposit and coordinate much of the activity that takes place during the escrow period. This deposit check might also be held by an attorney or in the broker's trust account. Ensure that your account has adequate funds to cover this check.

The deposit check will be cashed. Presuming the sale is finalized, this money will be applied to the purchase price of the house. If the sale does not conclude for any reason, you might be entitled to receive all of your deposit back, minus standard cancellation fees. In certain circumstances, the seller might be able to retain this money as liquidated damages. Before signing a purchase contract, it's advisable to consult with your counsel regarding whether a liquidated damages clause should be included in the contract.

1. The period that you are "in escrow" is often 30 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 agreed 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 lead to your desire 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 time allocated to you by the contract (and the seller will not provide a written extension of time), you must determine whether to remove the contingency and take a risk with obtaining a loan. You may opt to cancel the purchase contract.
3. A requirement that the seller must provide marketable title. With an attorney or title officer, explore the title report. The title must be "clear" to ensure that you do not encounter legal issues regarding your ownership. Investigate local and state ordinances regarding property transfer and ensure that you and/or the seller have complied with them.
4. Secure homeowner's insurance. This will likely be required before you can finalize the sale. Owing to requirements like special fire and earthquake insurance, acquiring this insurance may require a lengthy period. It is in your best interest to apply for insurance as soon as possible after the contract is signed.
5. Contact local utility companies to arrange to have service activated when you close escrow.
6. Schedule the final walk-through inspection. At this juncture, ensure that the property is exactly as the contract stipulates it should be. What you presumed to be a "permanently attached" chandelier that would come with the property might have been removed by the seller and replaced with a different fixture entirely.

You've made it! Once the sale has closed, you're the delighted owner of a new property. Congratulations!