You've Opened Escrow, Now What?
Congratulations, you are on your way to owning your very own home!
Follow these suggestions (and your realtor's advice) so that escrow and
settlement with go as smooth as possible.
You will be asked for a down payment on the home you are purchasing.
You can choose to put down as much or as little as you want (depending
on your mortgage), but remember, the more you put down toward the total
price of your home, the less time it will take you to pay off and the
less your mortgage payments will be every month.
During this period of purchasing your home, you are going to need an
escrow or settlement company to act as an independent third party so
that you know when and who to give your money to get the deed to your
new home. The escrow or settlement company will hold your deposit and
coordinate much of the activity that goes on during the escrow period.
This deposit check may also be held by an attorney or in the broker's
trust account. Make sure that there are sufficient funds in your
account to cover this check.
The deposit check will be cashed. Assuming the sale goes
through, this money will be applied to the purchase price of the home.
If for any reason the sale is not consummated, you may be entitled to
receive all of your deposit back, less standard cancellation fees. In
certain instances, the seller may be able to retain this money as
liquidated damages. Prior to executing a purchase contract, it would be
wise to speak with your counsel regarding whether or not it is your
best interest to have a liquidated damages clause as part of the
- The period that you are "in escrow" is often 30 days,
but may 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 come to an agreement 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 mean that you will want
to cancel the contract.
- 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 period of time granted to you by the contract (and
the seller will not provide a written extension of time), you must
decide whether you want to remove the contingency and take your chances
on getting a loan. You may choose to cancel the purchase contract.
- A requirement that the seller must provide marketable title.
With an attorney or title officer, review the title report. The title
must be "clear" to ensure that you do not have legal issues regarding
Check into local and state ordinances regarding property
transfer and make sure that you and/or the seller have complied with
Secure homeowner's insurance. This will probably be required
before you can close the sale. Due to such requirements as special fire
and earthquake insurance, obtaining this insurance may require a
lengthy period of time. It would be in your best interest to apply for
insurance as soon as possible after the contract is signed.
Contact local utility companies to schedule to have service turned on when you close escrow.
Schedule the final walk-through inspection. At this time, you
should make sure that the property is exactly as the contract says it
should be. What you thought 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 proud owner of a new home. Congratulations!