Congratulations! After looking at dozens of houses, and finally finding the house of dreams, you’ve placed a successful offer which the seller has accepted. There’s one more hurdle that not many new home buyers know about — the escrow process. So, what is the escrow process, and is it a big obstacle to you finally getting the keys to your house?
The answer is no. It’s not an obstacle at all, and is in fact a protection to you and to the seller. Typically what the escrow process entails is the deposition of the necessary funds and instructions into an account until all the terms and conditions for the sale of the house has been completed. The escrow is an additional protection that helps minimize the risk in the home buying process. The escrow with the money deposited in it shows that you are credible about your financial offer, and that you can include instructions with the escrow account.
For instance, the instructions include home inspections, repairs from the seller, and any other steps that are necessary to move forward with the sale. Here are what the instructions look like:
- Purchase price of the home
- Mortgage agreement
- The vesting of the buyer’s title
- Inspection reports
- Proration adjustments for taxes and insurance
- Date of possession of property
- Documents signed by the seller, buyer, agents, and other parties involved in the process
- Date of closing of the escrow
Getting the title report and title insurance is an important part of the escrow process. It makes sure that there are no liens on the property, and that you have a clear claim to your property. The title insurance protects both you and the lender from any potential legal challenges regarding your claim on the property. The inspection reports as a part of escrow concern the structural integrity of your home, pest inspection, plumbing, and roofing reports.
The disbursements happen when the checks in the escrow account have cleared, and the escrow holder has accounted for all funds and documents, and both the seller and buyer are up to date on the documents signed and needed. In this case, the escrow is closed, and you finally have the keys to your home!