As you’re nearing the end of your home buying journey, escrow, also known as Settlement, is the last step before you take the keys and move into your new space. While it’s an exhilarating time, it can also be a bit intimidating due to the number of steps involved in the process – it can be helpful to get escrow explained. Don’t worry – you’ll manage all of the steps of closing just as you’ve managed every other step associated with home ownership. And we’re here to help you with our escrow “how to”, designed to help you prepare for the closing process.
First and foremost, before closing escrow, do make sure your purchase contract is locked down and air tight. This is the map that outlines the process of closing, and clearly outlines the entire deal, down to what’s expected of both you and the seller. It also addresses what happens if the agreement dissolves, what’s included in the agreement, what has to happen before final closing (including property repairs and the like), the official date of closing, how the costs are to be managed on both sides and more.
All the terms should be spelled out to ensure both sides are taken care of appropriately, and that the stipulations are spelled out so they can be met. If anything looks out of sorts, make sure you address it with your real estate team before you get too far along in the process.
Next, do make sure the contingencies are clearly addressed. These are the conditions that both the seller and buyer have to address in order for the property to change hands. This can include inspection and appraisal reports, details surrounding financing, and anything else that both you and the seller’s team have discussed over the course of sale. There’s also a date when contingencies must be met. Once they are, the contingency can be taken off the contract after the buyer and seller sign off.
Also important: do look over the title reports. There’s both a preliminary and final report to review, during which you’ll ensure the property’s description is correct. You’ll also discover if there’s any issues surrounding your new property, such as liens or encumbrances. When the report becomes final you’ll want to ensure that you’ve worked with your real estate agent to clearly define how you want to take the property’s title. For example, will it be a joint tenancy, community or sole property? Talk with your real estate professional to ensure you’re detailing the title properly.
Of course, do keep an eye on your transaction costs. There are a lot of costs that get wrapped up into your mortgage such as title and closing costs. But fees and costs can increase as the process goes along. It’s okay – and actually, very smart – to review your Loan Estimate, which is an estimate of your closing costs so you can track everything as it goes along, and then make a comparison to the final statement, known as the Closing Disclosure, as you’re nearing the end of closing. If there are discrepancies in your estimate versus the final tally, address them with your real estate professional.
Lastly, do have everything ready to go on closing day. Yes, this means come prepared with your down payment and anything else that may have been outlined in your deal, but it also means showing up ready to take notes if there’s anything you don’t understand about the final part of the process.
Don’t forget to have patience, and if something doesn’t look right, don’t be afraid to ask questions and if you’re not satisfied, be prepared to walk away from the deal. Once both you and the buyer sign the mortgage documents and trade any final moneys due, the deed is officially done, and your documents go off to the county courthouse to be recorded.
Congratulations – you’re now officially a homeowner!