In Escrow? What You Need to Know
In Escrow? What You Need to Know
After a home buyer makes an offer on a home and after the offer is accepted by a seller, the buyer must write a check for earnest money. The earnest money is deposited into an escrow account for safe keeping. This begins the escrow period. The escrow period typically lasts about a month to 45 days. During that time, the buyer will have many responsibilities to prepare for the purchase.
Understanding the buyers responsibilities during this time can help make the home purchasing process easier. Here's what you need to know.
When the home purchase is finalized, the buyer must usually have a homeowners insurance policy in place. The escrow period is the home buyer's opportunity to shop around for insurance policies and find a policy that is the right price for them.
Homeowners insurance policies last for one year. A typical policy will usually cover fire, theft, lightning, vandalism and smoke damage. Home buyers who want additional insurance for flood, earthquakes or other non-covered events, must seek separate policies to cover these events. The homeowners insurance premium for one year is usually paid for at closing. Home buyers that are not using an escrow account should remember to budget this expense into their closing costs.
Two types of inspections usually happen during the escrow period: appraisal inspection and an inspection from a home inspector.
The appraisal inspection is usually a requirement of the mortgage lender. Lenders have home buyers to get an appraisal because they want to ensure that the home is worth the money that the lender is fronting for the purchase. In many cases, the lender will make all of the arrangements for the home appraisal.
If the home does not appraise at the right amount, the lender may reduce the amount they're willing to lend the buyer. When this happens, and depending on the procedures or contingencies in the purchase and sale agreement, the home buyer and seller may either renegotiate the price of the home, or the buyer, in most cases, can walk away from the purchase.
A home inspection is usually optional, but many Sundance Hills new home buyers choose to get one. During the home inspection, the inspector will note and report about the home's maintenance problems. The home buyer may use this information to renegotiate the price of the house, or negotiate repairs to be made by the seller. Once the inspection has been performed and repairs have been made, the buyers must lift the inspection contingency to proceed with escrow.
Throughout the escrow period, if there is a mortgage, the buyers lender will collect additional financial documentation from the buyer. This documentation is necessary to ensure that the home loan will go through at the end of the escrow period. Home buyers should avoid making any serious changes to their financial situation during the escrow period. Buying a car, changing jobs or taking on additional credit card debt or a loan could endanger the buyer's chances of being approved for their loan.
Packing and Moving
During the escrow period, the home buyer should be packing their belongings and preparing to move. Often during the escrow period, buyers must visit their new home to take measurements. If this is the case, buyers can work with their real restate professionals to gain access to the house.
In many cases, and depending ion the time of the year, home movers can be very busy. Prices may go up, and schedules fill fast. Home buyers who plan to use a professional moving company for their move should start meeting with movers shortly after entering the escrow period, to ensure that they'll be able to book a company for their move date.
Plans for New House
Home buyers who are planning to make changes to their home as soon as they move in may need to gain access to the house for contractors to bid on the job. It's important to be respectful of the seller during this period. Working with the real estate agent is important. The buyer's real estate agent will help the buyer work out a time when the buyer and contractors can come to the house without creating problems for the seller.
End of Escrow
The escrow period ends when the buyer pays all closing costs and the loan funds. This is when the home changes ownership. The earnest money that was paid at the beginning of the escrow period is deducted from the amount owed at closing. The escrow or title company should be in contact with the home buyers and/or their real estate agents for information regarding closing issues.
Work with Your Real Estate Professional
A good real estate professional will help the home buyer through the escrow period. If you're a home buyer just entering the market and you would like help from an expert during the purchase process, talk to a reputable real estate professional today.