Last week’s video was intended to give you guys a very general idea of what the term “escrow” means. This week I’d like to go into detail about what goes on during escrow from a buyers perspective so that you can be prepared when purchasing your home.
I. Opening escrow
Once your offer has been accepted by the seller and all terms in the contract have been negotiated, the seller’s or buyer’s agent will order escrow through an agreed upon company. An escrow officer will be assigned to your transaction and your agents will be given an escrow number for reference. When you obtain your escrow number you have officially entered escrow and it will be marked as the first calendar day of escrow.
The buyer will then have 3 days to submit their initial deposit, unless a different time frame was negotiated in contract ie: 24 hours, 5 days, etc. Initial deposit can either be wired directly from your bank or you can drop/deliver a check directly to escrow.
II. Opening package
Your lender will be requesting documents from you at this time to complete and submit your loan package however, you will also receive an opening package from escrow.
A standard package will include:
-Statement of information
-Fire insurance info form
-Preliminary change of ownership report
III. Reports and Disclosures to review and sign
Escrow will order a preliminary title report and will review to make sure that title is clear of any liens, judgments, loans. You will receive a copy of the report for your records and will need to sign off on it. Be sure to review on your own and ask your realtor if you have any questions.
If you are purchasing a home that is part of an association, HOA docs will also be ordered in the beginning of the transaction for your review and sign off. Things to look for are CC&R’s, Minutes, and Reserves.
c. Transfer Disclosure Statements (TDS)
The seller will provide you with a statement of any known material facts that might affect the value, desirability, or safety of the home.
d. Natural Hazard Disclosure
Escrow will order the NHD which will include whether or not the property is locaed in earthquake fault zones, fire and flood zones, or City or County natural hazards such as landslides. Some NHD reports may also supply info such as airport noise zones, Megan’s Law and Mello-Roos tax district.
e. Termite Report
If a termite report has been negotiated in the purchase contract (offer) then any reports will be need to be submitted to escrow.
f. City Property Reports and Inspections
Depending on which city your property is located in, they may require a city report, water conservation, retrofit, or smoke detector.
IV. Clear for Docs
Once all paperwork has been completed and the loan has been approved escrow will order loan documents and will schedule a time for the buyer to come in and sign in front of a notary. Documents will be forwarded to the title company.
After docs are signed and received, the lender is clear to officially fund the loan. Funds are sent to the title company.
VI. Record and Close
When title receives funds they are authorized to record documents and transfer ownership from seller to buyer. Recording happens the next business day after it funds and usually keys are transfered on the same day but depending on the purchase agreement possession of the home may be extended a few days after recording. Closing packages will be delivered to all parties. Close escrow!
Tips to buyers:
-Promptly review and sign all paperwork to not delay the process. Let your agent know if you plan on being out of town at any time during your escrow period.
-Let your agent know if the escrow is part of a 1031 tax-deferred exchange and provide info.
-Be responsive to your lender’s requested information as obtaining a loan is usually the most time-consuming part of the escrow process.
-If fire insurance is not provided by HOA, contact your insurance agent and provide info to your agent.
-Notify your agent if closing funds are coming from another party or country.
Pheew! That was a lot of info so please feel free to contact me with any questions. I’m always here to help in any way possible!
Below is a visual chart of the escrow process: