When escrow is opened the buyer’s deposit check will be cashed. Assuming the sale goes through, this money will be applied to the purchase price of the home. If for any reason the sale is not consummated, a buyer may be entitled to receive all of their deposit back, depending on the reason, less standard cancellation fees. In certain instances, the seller may be able to retain this money as liquidated damages. Prior to executing a purchase contract it would be wise to speak with your agent or attorney regarding whether or not it is in your best interest to have a liquidated damages clause as part of the contract.
A typical escrow period is between 30-45 days, but may be longer or shorter. An all cash deal may be able to close in under two weeks whereas deals with buyer financing involved may take a few months. During this time, each item specified in the contract must be completed satisfactorily. By the time you have opened escrow, you have come to an agreement with the seller on the closing date and the contingencies.
Each contract is different, but most include the following provisions:
Inspection: This should be completed as soon as possible after the contract to purchase is signed as unsatisfactory results of the inspection may mean that you will want to cancel the contract. The typical time frame for standard sales is 17 days, while REOs range for 5-10 days. Make sure you know this going into it.
Financing: Once the contract is signed, you have a period of time to secure funding. If, for any reason, you are unable to secure funding during the period of time granted to you by the contract (and the seller will not provide a written extension of time), you must decide whether you want to remove the contingency and take your chances on getting a loan. You may choose to cancel the purchase contract.
Clear title: The seller must provide marketable title. The title must be “clear” to ensure that you do not have legal issues regarding your ownership. This also falls under the buyer’s inspection time frames.
Insurance: The buyer will need to secure homeowner’s insurance before the close of escrow. Due to such requirements as special fire and earthquake insurance it would be in the buyers best interest to apply for insurance as soon as possible after the contract is signed. Again, the insurability of a property is supposed to take place within buyer’s normal inspection time frame.
Utilities: The buyer should use this time to contact local utility companies to schedule services to be turned on when you close escrow.
Final walk-through inspection: At this time, you should make sure that the property is exactly as the contract says it should be. What you thought to be a “permanently attached” chandelier that would come with the property might have been removed by the seller and replaced with a different fixture entirely. Any repairs made by the seller must be completed in a workman like manner. The property should be kept in a comparable condition to when the offer was first made.
When all provisions in the escrow instructions have been satisfied and the mortgage lender funds the buyer’s loan, the deed will be recorded and the escrow will be deemed “closed”.
More About the Real Estate Escrow Process;
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