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Real estate transactions involve significant funds and crucial documentation exchanges between you, the seller, your lender, and your sales associate. To safeguard all parties involved, the concept of escrow was established. It encompasses a third party acting as a neutral intermediary, managing instructions from both buyers and sellers. This party takes on the responsibility of paperwork handling, fund distribution, and deed recording, ensuring a secure transaction. This process typically lasts 15-30 days. Your sales associate will serve as your guide throughout the process.
Escrow Activities
Schedule and Attend Property Inspections
Property inspections (pest, general contractor, underground storage tank, and others) take place in the initial 15 days of escrow. Consider doing inspections for homes with prior reports due to the likelihood of aging. Attending inspections lets you gather firsthand information about potential issues, and ask questions.
Review Disclosure Materials
Sellers and sales associates are legally obligated to disclose information that could materially affect the home's value. Certain exceptions exist, such as probate and foreclosure sales.
Secure Financing
If not done earlier, during escrow, you must choose a lender or mortgage broker, complete a loan application, and provide financial documents. Appraisal is necessary. Securing financing usually takes 3 to 4 weeks. Pre-approval prior to writing an offer is recommended.
Decide on a Home Warranty
Either party can purchase a home warranty, covering unknown defects and system/appliance failures. Your sales associate can recommend providers for more information.
Remove Contingencies
After satisfactory inspections and lender approval, contingencies must be removed.
Increase Deposit
If your initial deposit was under 3% of the purchase price, after removing inspection contingencies, an increase to around 3% is often required.
Choose Ownership Form
If multiple buyers are involved, you must decide on the ownership structure.
Arrange for Insurance
Homeowners and fire/liability insurance are mandated by your lender.
Provide Notice and Prepare for Moving
If renting, notify your landlord 30 days in advance. Organize a moving company, activate utilities, and inform the post office and service providers.
Sign Documents
You'll sign loan documents and closing papers, often at the title company, accompanied by your sales associate.
Deliver Balance
Funds for closing, including the down payment and closing costs, should be delivered to the title company a couple of business days before escrow's close.
Collect Keys
Retrieve your property keys and closing documents.
Take the Next Steps
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