Going through a home-buying experience is quite an eye-opener. That is, if you’re paying attention to all of the components of the sale/purchase of a home. I’m sure most, if not all, of you have heard about ‘escrow’ before. But, what is it exactly?
When purchasing a home there are several items, or instructions, that should be followed. For example, there’s the listing and viewing the home, the home inspection, an appraisal, obtaining financing on the part of the borrower where applicable, etc. Throughout the process, there are specific items that both the seller and the buyer must do before property or money changes hands.
The buyer will put a down payment funds into an escrow account to be held until all items or instructions have been completed. Escrow will also hold the title to the property so that it cannot be sold to anyone else while the two parties are meeting all specified conditions.
An escrow account is a third party account that holds the funds so neither the seller nor the buyer can touch the funds or property until all instructions are completed and a Closing or Settlement Statement is provided. At this time, the payment of funds will be awarded to the seller and the property will be received by the buyer.
For simplicity sake, here are the 5 steps to escrow:
- The seller and buyer agree to specific terms (i.e. price, escrow & title companies, specific appliances to include in the purchase, etc.)
- The buyer puts money into the escrow account to hold until all instructions are complete
- The seller delivers the property (and any additional items as agreed upon) to the buyer
- The buyer accepts the property based on the agreed upon terms
- Escrow then pays the seller the money held in escrow
I have heard of 30-90 day escrows, and even some that have gone a little longer. We asked for a 45 day escrow.
While in escrow, this is the time to ensure you are depositing ‘good’ funds into the escrow account, ensure all correspondence is returned promptly, any documents requested are sent quickly, and ask your realtor, escrow officer, and loan officer if there is anything you can do to help close escrow sooner.
When you receive your closing papers, ensure that you read through all of the documents to make sure you understand what everything means. If you have any questions you can ask your escrow officer. Be sure to keep your closing papers for virtually forever. These papers will be useful when filing your taxes.
I am currently in escrow and constantly in contact with everyone who is assisting with the purchase of my home. This helps ensure they are receiving all necessary documentation from me to help push the process through to closing escrow (and getting the keys to my new house)!