Escrow: What Comes Next?

Congratulations on starting your journey to owning a new home! To ensure a smooth escrow and settlement process, follow these steps along with the advice of your real estate professional.


Down Payment Considerations

Your down payment plays a critical role in the purchase process. While the amount you put down depends on your mortgage requirements, remember that a larger down payment reduces your monthly mortgage payments and helps you pay off the loan faster.


The Role of an Escrow or Settlement Company

During the escrow period, an independent escrow or settlement company will handle the financial and administrative aspects of the transaction. They will hold your deposit and oversee the coordination of the necessary steps to finalize the sale. Alternatively, an attorney or broker’s trust account may hold the deposit.

Make sure you have sufficient funds in your account to cover the deposit check, which will be cashed and applied to the home’s purchase price. If the sale doesn’t close, you may receive your deposit back minus any agreed-upon cancellation fees. In some cases, the seller may keep the deposit as liquidated damages. Speak with your attorney about including or excluding a liquidated damages clause in your contract.


Escrow Timeline and Key Tasks

The escrow period typically lasts around 30 days but can be longer or shorter based on the agreement with the seller. During this time, the following items must be completed as outlined in your contract:

1. Inspection Contingency

Schedule your home inspection as soon as possible. If the results reveal significant issues, you may choose to cancel the contract or negotiate repairs.

2. Financing Contingency

You’ll have a set time frame to secure your loan. If you can’t obtain financing within the allotted time and the seller won’t grant an extension, you’ll need to decide whether to proceed or cancel the contract.

3. Marketable Title Requirement

Work with a title officer or attorney to review the title report and ensure it is clear of any legal encumbrances. Research local and state regulations related to property transfer and ensure compliance by both parties.

4. Homeowner’s Insurance

Most lenders require you to secure homeowner’s insurance before closing. Depending on the property’s location, you may need additional coverage, such as fire or earthquake insurance. Apply as soon as the contract is signed, as this process may take time.

5. Utility Setup

Contact local utility companies to arrange for services to be activated on the day of closing.

6. Final Walk-Through Inspection

Before closing, conduct a final walk-through to ensure the property matches the agreed-upon terms in the contract. For example, ensure fixtures and appliances included in the sale are still present and in the expected condition.


Closing Day: Your New Home Awaits

Once all contingencies are resolved, paperwork is signed, and funds are transferred, the sale is finalized. At this point, you officially become the proud owner of your new home.

Congratulations on this exciting milestone! Let your real estate professional guide you through each step for a stress-free experience.