THE HOME BUYING PROCESS
Choose & Meet Your Realtor
Building a solid relationship with a realtor is important. He or she will be working closely with you in finding the perfect home to meet your unique needs. Professional realtors have extensive market knowledge and will provide guidance in your buying process.
Finding the Perfect Home
Your realtor will show you homes based on the criteria that you have given him. The more precise and direct you are with your realtor, the more successful your search will be.
Determine the Seller’s Motivation
Once you have found your perfect property, your realtor will research the homeowner’s motivation for selling, helping leverage your negotiating power in an offer to purchase.
Offer to Purchase
Your realtor will draft a purchase agreement, advising you on customary practices, local regulations, and protective contingencies. You will need to provide an “earnest money” deposit at this time, usually ranging from 1% to 3% of the purchase price (deposit amount is not cashed until your offer is accepted by the seller). Your realtor will present your offer to the seller’s realtor. The seller will then either accept your offer, counter your offer or reject your offer.
Seller’s Response
You and your realtor will review the seller’s response. Your realtor’s knowledge of the process and strong negotiating skills will help you reach an agreement you feel good about.
THE ESCROW PROCESS
Open Escrow
Your realtor will open escrow for you once the purchase agreement is accepted and signed by all parties. Your “earnest money” will be deposited at this time. All funds associated with your transaction, either held, received, or distributed, will be handled by your escrow or title company.
Contingency Period
This time period is determined by your purchase agreement and is used to obtain and perform the following items:
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Physical Inspection of Property
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Property Pest Inspection
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Property Appraisal
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Secure a Lender
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Obtain Loan Approval
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Approval of Seller’s Transfer
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Disclosure Statement
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Preliminary Report Approval from
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Title Company
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Satisfy Purchase Contingencies
Homeowner’s Insurance
Your realtor will work with your escrow officer and insurance agent to ensure your policy is in effect by the close of escrow.
Down Payment Funds
Prior to the closing date of escrow, you will need a cashier’s check or wire transfer.
Close Escrow
You will sign all loan documents and closing papers when all conditions of the purchase agreement have been met. After you deposit the balance of your down payment and closing costs to the escrow officer, your lender will deposit the balance of the purchase price. The County Recorder’s office will record the deed, and you will take ownership of your home.
INFORMATION ABOUT ESCROW
& HOW IT WORKS
What Is Escrow?
When the decision is made to purchase a property, terms and conditions are established for the ownership transfer of that property. These terms and conditions are given to a third party known as the escrow holder. The escrow holder acts for both parties and protects the interests of each within the authority of the escrow instructions.
How Does the Escrow Process Work?
The escrow is a depository for all monies, instructions and documents necessary for the purchase of your home, including your funds for down payment and your lender’s funds and documents for the new loan. Generally, the buyer deposits a down payment, and the seller deposits the deed and any other necessary documents with the escrow holder. Prior to close of escrow, the buyer deposits the balance of required funds with the escrow holder.
The escrow holder delivers the monies to the seller and forwards the deed to the title company for recording. The title company notifies the escrow holder that a policy of title insurance can be issued, showing title to the property is vested in the name of the buyer. The escrow holder handles the prorations and adjustments on any fire/hazard insurance, real estate taxes, rents, interest, etc., based on the escrow instructions of both parties. Escrow is completed once all terms and conditions have been satisfied and all parties have signed escrow documents.
How Do I Open an Escrow?
Your real estate agent will open the escrow for you. As soon as you execute your purchase agreement/joint escrow instructions, your agent will place your initial deposit into an escrow account with a closing company, such as Quality Title.
How Will I Know Where My Money Has Gone?
Written evidence of your deposit is generally included in your copy of the purchase agreement/ joint escrow instructions. Your funds will then be deposited in a separate escrow or trust account and processed through a local bank.
How Long Is an Escrow?
The length of an escrow is determined by the terms of the purchase agreement and can range from a few days to several months.
What Information Will I Have to Provide?
Confidential Statement of Identity. Because so many people have the same name, the statement of identity is used to identify the specific person in the transaction by determining date of birth, social security number, etc. The statement form is necessary and the information is kept confidential.
Lender Information. Provide the escrow holder with the name, address and phone number of your lender as soon as possible after opening escrow.
Home Owners Insurance/Hazard/Fire Information. If you are purchasing a single family, detached home, or in some cases, a town home, be sure to order your home owner's insurance/fire/hazard insurance once your loan has been approved. You should immediately begin looking for an insurance agent; not all companies can write property hazard insurance. Call your escrow holder with the insurance agent’s name and phone number so that he/she can make sure the policy complies with your lender’s requirements. You must have your insurance in place before the lender will fund money to the title company. The escrow holder will need this information in order to prepare the grant deed, and your lender will need this information to prepare loan documents.
What Is “Close of Escrow”?
The close of escrow signifies legal transfer of title from the seller to the buyer. Approximately three days before the scheduled close of escrow date, the loan documents are executed by the buyer. The new lender takes 24 to 72 hours to review the final executed documents and then wires the loan funds to the title company. Escrow collects the remainder of the buyer’s down payment and closing costs. When loan funds are wired, the file is then set up to record (a legal transfer of title from the seller to the buyer). The escrow holder then handles all final accounting, issuance of official closing statements and disbursement of any remaining proceeds to all parties.
Want More Information or Still Have Unanswered Questions?
The above comments are intended as an introduction to the real estate transaction process and not legal advice or opinions. If you have any questions or want more information, you should contact one of our attorneys.