Once you have made an offer on a home and it is accepted, you go into a process called escrow. While you have made a huge step forward into buying your home, there's still a long way to go until you actually close on the home and are named the new owners!
What is Escrow
Escrow is "a contract, deed, bond, or other written agreement deposited with a third person, by whom it is to be delivered to the grantee or promisee on the fulfillment of some condition." It includes the sales contract, earnest money and other instructions such as insurance, inspections or repairs that is put into an account and held by a third party, the escrow agent, until the sale is complete. This protects those funds and ensures that everything in the agreement are met. It also lessens the risk involved for the buyers, lenders and the sellers. It protects the seller, by proving that the buyers actually have the funds to buy the home. It protects the buyer by proving that the seller is the legal owner of the home and that the home has a clear title. As for the lender, they are protected, because, by placing earnest money into the escrow account, the agents involved know that there are funds to pay them for their work. Once the escrow agent collects what they need, the buyer gets title insurance and a title search to make sure there are no claims on the house.
What Needs to Get Done During Escrow
During the time when the home is in escrow, a lot of things need to get completed. This is when the home inspection occurs to ensure that there aren't any problems with the property. Here, you will learn what repairs are needed and how much that might cost. If it is getting way more expensive than you bargained for, you can go back to the seller and request a credit back for those repairs at closing. You will also have to go through the final steps with your lender. All pay stubs and other documents should be up to date and the home should get appraised during this time. You will also finalize how you want to pay off your loan and what interest rates you want to lock in. During escrow it is also the time to read all documents related to title insurance, plat/survey, HOA and schedule of exclusions. A meeting with your insurance agent is also a good idea to make sure you are properly ensured.
The End of Escrow
The escrow process can fail for many different reasons and lead to an unsuccessful closing. For example, the seller can refuse the sale of the home if the escrow agent doesn't do their job right, if the home isn't worth the loan amount, the lender won't ok the loan or if the buyer can't provide proof of their financial stability. If everything checks out ok, however, the escrow agent will be in charge of putting together the purchase agreement and coordinating the final close. The buyer will then sign documents, the deed will be recorded in the buyers name, the down payment will be paid and you will own the home!
I am a real estate professional, serving Boulder and Denver, Colorado. My extensive knowledge of the market, coupled with my commitment to provide extraordinary service, has resulted in hundreds of successful transactions. Let me help you buy or sell your home.