For first-time home buyers, escrow is a process that might seem shrouded in secrecy and it's true that this process can be a bit confusing. Escrow is a stretch of time that begins when a seller decides to accept an offer you have made on their home, and it ends on the day you actually own your new home.
Escrow simply is an account that is held by a third party between the time of an offer's acceptance and the day the new owner takes possession. This third party handles most or all of the legal documents that must be completed during this escrow period, as well as handling the money. The buyer begins by opening an account with the escrow company and giving them a check.
This check is not usually cashed and basically just holds the property for you. By giving this check and signing a contract with the seller, it locks you into escrow together. The seller can accept backup offers but cannot go into escrow with anyone else. The check you give the escrow company eventually will be used to cover a portion of your down payment.
After the contract is signed and the check is received, then it's time to handle all of the many tasks that must occur prior to closing. First, the bank that is lending you the money for your home loan will appraise the property to ensure that it is not worth less than you are paying. If the appraisal comes back with a lower value, the bank might deny the loan and you will have to appeal the appraisal, find another lender or re-negotiate the purchase price with the seller.
Inspections take place during escrow near the beginning days of this period. Inspections are hugely important and it is essential that you hire the best quality inspectors available. They will inspect every inch of the home, including any basement, the attic areas, the outside of the home and the roof. They will test the faucets, electrical outlets and look for issues such as mold or evidence of foundation problems or water damage. You also should have the property inspected for termites and possible have a geological report completed. Geologic reports are a good idea in areas prone to earthquakes or ground movement or if you notice a plethora of cracks inside the home.
It's unlikely that the inspector won't find at least a few little issues, but often they are fairly minor and can be repaired easily. The seller might even fix a few of them prior to moving out, if you ask. However, if the home has mold or termites or a bad roof, these are very serious issues and you need to think about your options. These problems can be fixed, but usually at a pretty high cost so you will either want to ask the seller to make repairs or put money in the escrow account to cover the cost of the repairs after closing. If the seller won't negotiate, you have the option of continuing the escrow anyway or canceling the contract and looking for another home.
Assuming there are no major issues upon inspection, you will continue further down the path toward home ownership. This means you will need to get insurance for your new home, and you set this up prior to purchasing the home. In some places, you also must get flood insurance. You also must have a title report and what is known as title insurance. This simply ensures that there are no liens that have been placed against the home. A title company might handle this or it might be the escrow company.
At this point, you are getting very close to owning your home and during those last few days, you will get to walk through the home a final time for a quick inspection to make sure everything still looks good. You will also have to sign tons of paperwork, and at last, the lender will cut a check for the seller and the home will be yours. You definitely should expect to have this process last one month and sometimes slightly longer. For buyers searching for Texas Hill Country real estate, the team at Nixon Real Estate not only can help you find Fredericksburg homes for sale or Kerrville homes for sale, they can help guide your through the entire escrow process.
Escrow simply is an account that is held by a third party between the time of an offer's acceptance and the day the new owner takes possession. This third party handles most or all of the legal documents that must be completed during this escrow period, as well as handling the money. The buyer begins by opening an account with the escrow company and giving them a check.
This check is not usually cashed and basically just holds the property for you. By giving this check and signing a contract with the seller, it locks you into escrow together. The seller can accept backup offers but cannot go into escrow with anyone else. The check you give the escrow company eventually will be used to cover a portion of your down payment.
After the contract is signed and the check is received, then it's time to handle all of the many tasks that must occur prior to closing. First, the bank that is lending you the money for your home loan will appraise the property to ensure that it is not worth less than you are paying. If the appraisal comes back with a lower value, the bank might deny the loan and you will have to appeal the appraisal, find another lender or re-negotiate the purchase price with the seller.
Inspections take place during escrow near the beginning days of this period. Inspections are hugely important and it is essential that you hire the best quality inspectors available. They will inspect every inch of the home, including any basement, the attic areas, the outside of the home and the roof. They will test the faucets, electrical outlets and look for issues such as mold or evidence of foundation problems or water damage. You also should have the property inspected for termites and possible have a geological report completed. Geologic reports are a good idea in areas prone to earthquakes or ground movement or if you notice a plethora of cracks inside the home.
It's unlikely that the inspector won't find at least a few little issues, but often they are fairly minor and can be repaired easily. The seller might even fix a few of them prior to moving out, if you ask. However, if the home has mold or termites or a bad roof, these are very serious issues and you need to think about your options. These problems can be fixed, but usually at a pretty high cost so you will either want to ask the seller to make repairs or put money in the escrow account to cover the cost of the repairs after closing. If the seller won't negotiate, you have the option of continuing the escrow anyway or canceling the contract and looking for another home.
Assuming there are no major issues upon inspection, you will continue further down the path toward home ownership. This means you will need to get insurance for your new home, and you set this up prior to purchasing the home. In some places, you also must get flood insurance. You also must have a title report and what is known as title insurance. This simply ensures that there are no liens that have been placed against the home. A title company might handle this or it might be the escrow company.
At this point, you are getting very close to owning your home and during those last few days, you will get to walk through the home a final time for a quick inspection to make sure everything still looks good. You will also have to sign tons of paperwork, and at last, the lender will cut a check for the seller and the home will be yours. You definitely should expect to have this process last one month and sometimes slightly longer. For buyers searching for Texas Hill Country real estate, the team at Nixon Real Estate not only can help you find Fredericksburg homes for sale or Kerrville homes for sale, they can help guide your through the entire escrow process.
About the Author:
Pammy McGrath enjoys reading real estate blogs. If you are looking for licensed Fredericksburg TX real estate agents, or to find Fredericksburg homes for sale, please check out the NixonRealEstate.com website today.
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