Real Estate Escrow Process
Escrow is where a neutral third party acts as a depository for money, documents and instructions involved with a real estate transaction. The escrow officer ensures all conditions of the sale are met prior to disbursement of any funds or documents. Escrow companies are typically either an escrow-only firm that does not offer title insurance or an escrow and title company. Once the terms of the sale are negotiated between you and the seller, the purchase agreement and your deposit check get placed into escrow to start the real estate escrow process. On average, escrow typically lasts 30 to 45 days.
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Instructions
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Choose a reputable escrow company with which to open your escrow account. The escrow holder is usually selected through agreement between the principals (buyer, seller and lender). Your real estate agent can usually take care of this step for you.
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Place your "good-faith" deposit into the escrow account within three days after the seller accepts your offer. The amount of a good-faith deposit is usually 3 percent of the purchase price. You will be expected to come up with the remainder of the total down payment at the close of escrow.
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Start the loan process if you have not been pre-approved for a loan. As a buyer, fill out a loan application and provide the money for an appraisal. You will be required to present the lender with tax returns, bank statements, paycheck stubs and your funding source for the down payment.
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Arrange for an inspection of the property within two weeks of the seller's acceptance of your offer. An inspection will reveal the physical condition of the property, as well as any potential geological issues. Have the owner complete a transfer disclosure statement in which they disclose any known problems with the property.
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Provide the seller with a list of issues found during the inspection. Indicate which problems you would like the seller to resolve before the close of escrow. You may need to negotiate with the seller about which issues will be fixed or if any necessary repair or replacement costs will be deducted from the final selling price.
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Go back to the property within five days of escrow closing. Make sure the seller has taken care of any issues agreed upon previously. Verify that the property is in the same condition as it was when you made your initial offer.
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Sign all loan documents at the escrow office. Generally, you will be required to bring in a cashier's check for the balance of your down payment as well. At the close of escrow when you sign all the documents, you may need to have two forms of picture identification.
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References
Resources
- Photo Credit Sold Home For Sale Sign on Burst image by Andy Dean from Fotolia.com
