The Escrow Process for Buyers


Your offer has been accepted! Here is everything you need to know about the escrow process.

1. Escrow

Deposit: With the opening of escrow, you’ll receive wire instructions to put a 3% deposit into an escrow account (a 3rd party trust account). The deposit will stay there until the close of escrow, at which point it will apply toward your down payment and closing costs. Directly after the opening of escrow, you will receive instructions that will outline the terms of your deal.

Escrow Instructions: You will need to review and sign the documents in the escrow package. Included in the package are the following:

  • Preliminary Title Report: This is a summary of any liens, encroachments, easements, etc. that might be affecting title to the property.
  • Title Vesting Information: This document will ask you how you will take title to the property.  For any questions regarding this, please consult an attorney.
  • HOA Documents: This is for anyone who is purchasing a condominium, townhouse or single-family residence within a Homeowners Association. It includes the association’s accounting information, minutes from the meetings and the covenants, codes, and restrictions (CC&R’s).

Please let us know if you would like us to review the information with you.

2. Insurance

You will need to have homeowner’s insurance in place by the time you close escrow, and this is the perfect time to begin your research.  Some ideas:

Many buyers like to start with their current auto or renters’ insurance carrier.  

If you are buying a condominium, you want to check with the insurance company that insures the building (this information may be found in the Homeowners Association documents).  In the event that a claim is filed, this assures that the inside and the outside of your property are insured by the same company and will help economize your time and avoid unnecessary stress.  

3. Contingencies

Your three main contingencies are Loan, Appraisal, and Investigation. They are there to protect you and will only be removed after your appraisal and loan have been approved and the investigation of the property has been thoroughly researched. After this has happened, they must be removed in writing, unless otherwise specified in the contract.

Loan: Call your lender and let them know you have opened escrow. They will want a copy of the signed contract immediately, and will then order the appraisal.

Investigation: Your contract likely calls for a buyer’s investigation contingency that is anywhere from 3-17 days, depending on the negotiation. It is important that we schedule a home inspection and begin completing our due diligence as quickly as possible. Inspections will reveal what repairs are necessary and each escrow will be different in what we can expect from the seller. If there are any major issues that were not expected, we will request that the seller remedy the issues prior to the closing of escrow or offer a credit for you to handle after escrow closes. The goal is to remove the contingency and move forward. If for some reason an inspection causes you to change your mind about purchasing or if we cannot come to an agreement with the seller, you have the option of backing out. You will not lose any money aside from what you spent on your inspections.

  • The General Inspection: General home inspectors vary in price according to the size of the property and the scope of the inspection. You will be quoted a price when you schedule the inspection.
  • Additional Inspections: You will want to schedule any additional inspections immediately, such as the geological or sewer inspection. Feel free to contact us in person to discuss each extended inspection.

If you are still trying to figure out if this purchase is right for you, this is the time to explore any other factors that may be causing doubt. This contingency time is there to allow buyers to research what is important to them about this purchase. Will this commute work for you? Do you want to pull permits? How do you feel about the school district? It’s important to remember that the investigation contingency is an umbrella, that allows you to investigate any factor relevant to you, not just the physical condition of the property.

4. Disclosures

You will receive a stack of disclosures from the seller that will inform you of any known matters affecting the property. Please read carefully, and let us know if you have any questions or concerns.

5. Contingency Removal

As soon as your appraisal is finished, your loan has been approved and the investigations have been completed, it is time to remove your contingencies.  This must be done in writing and instructs the seller that you are fully satisfied and ready to close the deal. After removing the contingencies, you will no longer be able to cancel escrow without losing your 3% deposit to the seller.

6. Closing

Signing of Loan Documents: As we advance toward the closing of escrow, you will be working with the bank to clear any conditions that are required by the lender. Once the conditions are cleared, the lender will draw up the loan documents and send them to escrow for signing. You will then be contacted by escrow to set up a time for the signing. It is important that you keep your schedule open, as things become very rushed as we approach closing and you will need to be ready to sign as soon as escrow receives the documents.

Closing Costs: One of the documents you will receive at the signing is the Buyer’s Estimated Closing Costs Statement. This is a document of all the debits and credits incurred by the buyer during the entire escrow process (any credits issued by the seller, escrow fees, title fees, loan fees, etc). This statement will give you the total amount needed to complete your down payment and cover your closing costs as well as wiring instructions. The funds must arrive at escrow two days before the close date, so the bank must receive the wiring instructions as soon as possible.

The Final Walk-through: The final walk through allows you to walk through the property before the closing of escrow to ensure that it is more or less in the same condition as when escrow first opened. Often the seller will be there to give you important information about the property that includes things such as the names and numbers of their vendors and instructions on how to work certain appliances and equipment.

Utilities: You will want to put all utilities in your name before you move in.

The Last Few Days: This is what will be happening just prior to and after closing:

  • After the loan documents are signed and returned to the lender, escrow is then given funding conditions.
  • The loan is “funded” by escrow the day before we close (this means your wire needs to be in escrow by then). They will notify us as soon as the funding is complete.
  • The sale records at the county recorder’s office the day after funding. When this happens, we will be notified, and then you can pick up your keys. Time to move into your new home!

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