Escrow Process


The escrow process can be confusing to first-time home buyers as well as sellers. In fact, many find it more complicated than they expected, although it all depends on the details of the transaction. Every escrow is different, although there is a general timeline that is followed. It all begins when the home seller accepts and signs the purchase agreement and the escrow account is opened. Here is an overview of the escrow process that New Era Escrow will manage as a neutral third party.

1. Opening Escrow

After the seller and buyer sign the Purchase Agreement, the real estate agent collects the earnest money deposit. This is deposited into a secure escrow account at the escrow company both the seller and buyer have agreed to use. The escrow company will hold this earnest money in trust and only disperse it once all contract terms have been met.

The real estate agent will typically deliver the Purchase Agreement to the escrow company. It will then be assigned to an escrow officer, who will give the transaction an escrow number. The broker can provide the escrow agent with additional information about the transaction, including contact information, title information, and any other details that are necessary.

2. Awaiting Bank Approval

Once escrow is opened, the bank that will provide financing must appraise the property. This appraisal, which is paid for by the home buyer, protects the bank’s interest in the property if a foreclosure ever occurs. If the appraisal comes in lower than the offered purchase price, the lender will not finance the purchase unless the seller and buyer agree to a lower price or the buyer pays the difference. In some cases, a new appraisal can be ordered or the buyer may try working with a different lender.

3. Securing Financing

The buyer will need to provide the lender with the address of the property. The lender will prepare the Good Faith Estimate of the loan, which provides loan details, closing costs, interest rates, and costs of buying the home.

4. Approving Disclosures

The buyer will receive written disclosures from the seller of any issues with the home that the seller has identified. This includes known pest problems or work that is in violation of building codes.

5. Conducting Home Inspections

One or more inspections may be done on the home during the escrow process. The standard home inspection is not always required, but many loans do require one. Buyers are encouraged to get a home inspection as well to identify defects that may be dangerous or very costly to repair. In some cases, the lender may also require an environmental or pest inspection or a flood report, if the home is in an area prone to flooding.

6. Acquiring Hazard and Homeowners Insurance

In some cases, hazard and homeowners insurance must be purchased before closing.

7. Obtaining Title Reports and Title Insurance

A title report must be prepared on the property to ensure the buyer will receive a clear title with no liens. Title insurance, meanwhile, can protect either the lender alone or the buyer and lender (if both policies are purchased) against legal challenges if a title issue is discovered later. If a title issue is discovered during the escrow process, the seller must fix it before the sale can proceed.

8. Final Walk-through Before Closing

Before escrow closes, the seller will re-inspect the property to make sure there is no new damage and the buyer will have the opportunity to take a final tour of the home to ensure it is in good condition and any items stated in the contract have been left.

9. Closing Escrow

Finally, escrow will close once the buyer and seller sign final paperwork. After this paperwork is signed, the escrow company prepares a new deed to be sent to the county recorder’s office. A wire transfer or cashier’s check is provided for the down payment and closing costs and the lender wires loan funds to escrow. All other documents and funds will change hands at this time.

Your escrow officer at New Era Escrow will manage all aspects of the escrow process from start to finish.


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