- You are on your way to owning your own home! Escrow and settlement will go smoothly if you follow these suggestions and your REALTOR®’s advice.
- You will need to make a down payment on the home you’re purchasing. You can put down as much or as little as you want depending on the type of mortgage you select. Keep in mind that the more you put down, the less time it will take to pay off the loan and the less your payments will be each month.
- You will need an escrow or settlement company to act as an independent third party so you’ll know when and who to give your money to get the deed to your new home. The escrow or settlement company will hold your deposit and coordinate most of the activity that transpires during the escrow period. Your deposit check could also be held by an attorney or in the broker’s trust account.
- The deposit check will be cashed and the money will be applied to the purchase price of your new home. If the sale is not consummated, you may be entitled to receive all of your deposit monies back, less standard cancellation fees. Prior to executing a purchase contract, it would be wise to speak with your counsel regarding whether it’s in your best interest to have a liquidated damages clause as part of the contract or not.
- The escrow period is often 30 days but may be longer or shorter. Each item in the contract must be completed satisfactorily during this time. By the time you have opened escrow, you and the seller have come to an agreement on the closing date and the contengencies. Each contract is different but most include the following:
Inspection contingency: This should be completed as soon as possible after the contract to purchase is signed. Unsatisfactory results of the inspection may mean that you will want to cancel the contract.
Financing contingency: You have a period of time to secure funding once the contract is signed. If you are unable to secure funding during the time period granted, you must decide whether you want to remove the contingency and take your chances on getting a loan or cancel the purchase contract.
- The seller must provide marketable title.
- Review the title report with an attorney or title officer. The title must be “clear” to ensure that you do not have legal issues regarding your ownership.
- Make sure you and/or the seller have complied with your local and state ordinances regarding property transfer.
- Secure homeowner’s insurance. You should apply for insurance as soon after the contract is signed as obtaining this insurance may require a lengthy period of time. Homeowner’s insurance will probably be required before you can close the sale.
- Contact local utility companies to schedule new service be connected when you close escrow.
- Schedule the final walk-through inspection. You should make sure that the property is exactly as the contract states it should be during this inspection.
- Once the sale has closed, you’ll be the proud owner of a new home. Congratulations!
