June 18, 2022 | Sexton Real Estate Group
When you are buying or selling a property, it is important to understand the escrow process. This article will provide a beginner’s guide to understanding what escrow is and how it works. Escrow is a process where funds and documents are held by a third party until all terms of an agreement have been met. It can be used in real estate transactions, but can also be used in other types of transactions as well. This article will discuss the basics of the escrow process and how it can benefit you when buying or selling property.
The Following Are The Main Players:
- The Buyer – The party who is buying the property.
- The Seller – The party who is selling the property.
- The Title Company – The company that will hold the escrow funds and documents.
- The Escrow Agent – The person who works for the title company and manages the escrow account.
- The Lender – The party who is providing financing for the property.
A Walkthrough Of The Escrow Process, From Start To Finish
The escrow process is one of the most important steps in buying or selling a home. Here’s a step-by-step guide to how it works, from start to finish:
Open an Escrow Account
The first step in the escrow process is to open an escrow account with a licensed escrow agent, who will act as a neutral third party throughout the transaction.
Deposit money to the escrow company
Once you’ve opened an escrow account, the next step is to deposit money into it. The amount of money you’ll need to deposit will depend on a few factors, including the purchase price of the home, the down payment, and any closing costs that need to be paid.
Request inspection, any necessary repairs, and appraisal
The next step is to request a home inspection, which will give you an idea of any necessary repairs that need to be made. You’ll also need to request an appraisal, which will help determine the value of the home.
Negotiate based on differences between the offer and appraisal
Once the inspection and appraisal have been completed, you’ll need to negotiate with the seller based on any differences between the offer price and the appraised value.
Wait for paperwork and loan to be processed
Once the negotiations are complete, you’ll need to wait for the paperwork to be processed and for your loan to be approved.
Receive underwritten approval
After your loan has been approved, you’ll receive an underwritten approval, which is a document that states that you’re approved for the loan.
Pay closing costs and sign paperwork
Once you’ve received your underwritten approval, the next step is to pay your closing costs and sign all of the necessary paperwork.
How Long Is The Escrow Process?
The typical escrow process takes anywhere from 30 to 60 days. The length of time is dependent on a number of factors, including the type of property being purchased, the buyer’s financial situation, and the speed of the real estate market.
It’s important to note that the escrow process can be shortened or lengthened depending on the needs of the buyer and seller. If both parties are in agreement, it’s possible to complete the escrow process in as little as two weeks. However, if there are any complications along the way, it could take much longer.
What Should You Not Do During Escrow?
During escrow, there are a few things you should avoid doing. One is to not make any large purchases or financial commitments. This can affect your loan approval and throw off your entire escrow timeline. Another is to not change jobs. Lenders like to see stability in employment, so a job change during escrow could jeopardize your loan approval. Finally, don’t open any new lines of credit during escrow. This could also affect your loan approval and result in a higher interest rate. So while it may be tempting to do some major shopping during escrow, resist the urge and wait until after you close on your new home.
What Determines The Length Of Escrow?
The most common factors that determine the length of escrow are:
- The type of property being purchased
- The location of the property
- The sales price of the property
- The type of loan being used to finance the purchase.
How Can You Speed Up The Escrow Process?
You can speed up the escrow process by doing these things:
- Get pre-approved for a mortgage
- Make an offer as soon as you find a property you like
- Get an inspection report
- Open escrow immediately
- Close on the property quickly
Following these steps should help you close on your new home in no time.
Can A Home Fall Out Of Escrow?
There are a few reasons why a home can fall out of escrow. The most common reason is that the buyer is unable to get financing. This can happen if the buyer’s credit score decreases or if they lose their job. The home can also fall out of escrow if the inspection report reveals major problems with the property. Lastly, the seller can cancel escrow if they receive a better offer from another buyer. While it’s not common, homes do fall out of escrow from time to time.
So, there you have it! The beginner’s guide to the escrow process. Hope this article has helped clear some things up for you and that you feel more confident about what happens during escrow. If you still have questions or would like more information, please don’t hesitate to give Sexton Group Real Estate Property Management a call. Their team is ready and happy to help!
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