Are We There Yet?: An Overview of the Escrow Process

You have found the home, made an offer, and the seller has accepted. Time to celebrate? Hold the champagne. The closing process, like all aspects of the home buying process, is just that: a process.

As long as your financing is solid and the seller does not seem sketchy, you can probably get excited because you will likely be the new owner of the home for sale. What stands in your way are details: paperwork, inspections, and transferring of funds and deeds, which are all done during this process, otherwise known as escrow.

Here is a basic chart outlining the closing process. Don’t worry if it looks a little overwhelming – your Realtor® will be able to guide you through each step. In fact, the closing process is going to differ for each person, depending on your local or state regulations, so it’s critical to use a local expert who knows the ins and outs of real estate in your neighborhood.

Closing on a home is a group affair. You will be working with your Realtor®, a title company or closing officer/attorney, your lender, the seller’s agent, and possibly even the seller. The illustration shows you the general order in which the escrow process happens, but we’re going to break down the responsibilities.

 

The Buyer:

·         Earnest Money Deposit – You are responsible for coming up with the earnest money or “good faith” deposit that secures your offer. This is different from the down payment and is essentially a deposit to show the seller that your money is where your mouth is.

·         Homeowner’s Insurance – Most lenders will require you to have homeowner’s insurance that covers damages from many natural disasters. If you live in a flood or earthquake-prone area, you may also be required to purchase additional insurance.

·         Inspections – If you want an inspection performed on the home, you need to order it yourself. Ask your Realtor® for recommendations for professional home inspectors. Keep in mind that a home inspection will evaluate the general condition of the home, but for things like mildew or pests, you will need to order a separate inspection.

·         Cashier’s Check – Your Realtor® will be able tell you how much you need to bring to the closing appointment in the form of a cashier’s check. Make sure you have the funds in place as early as possible.

·         Closing Appointment – You will obviously need to be at the closing appointment where you will sign all the necessary paperwork to transfer the title to your name and receive the keys to your new home. Be prepared and organized for this important meeting.

 

Closing Officer/Title Company:

·         Title Check – The title company or closing officer/attorney will verify that the seller is the legal owner of the home and make sure there aren’t any outstanding claims against the property.

·         Mortgage & Paperwork – When your loan is approved, the title company will set up a closing appointment with you and obtain all the necessary documentation from the seller’s lender.

Lender:

·         Appraisal – The lender will arrange for a thorough appraisal of the property to determine its value.

·         Approval – Your lender will approve your loan (fingers crossed!) and send the title documents to the title company. If possible, it’s best to get pre-approval to expedite this process and to enter escrow with a lot less anxiety.

 

The Seller:

·         Disclosure – Once in escrow, the seller must disclose any relevant material facts about the property, including any property defects or lawsuits regarding claim of ownership.

·         Closing Appointment – The seller may be present at your closing appointment to sign all the paperwork, or they may sign at a separate appointment. They must vacate the property and hand over the keys.

Whew, that’s a lot! but as a new homebuyer, remember that you are only responsible for part of the escrow process, and your Realtor® will serve as a guide through the process.

Make sure your financing is in order (including home insurance), arrange any for any home inspections, and sign all the documents. After that, if all goes well and your transaction is recorded by the county, then it’s official: you are the new homeowner!

To read more about the closing process, visit ZipRealty's Learning Center to read articles about the escrow process. Stay tuned for some more specifics on different stages of the closing process.