Home Buying 101 Series: You’re in Escrow!

January 23, 2019

“If I were asked to name the chief benefit of the house, I should say: the house shelters daydreaming,
the house protects the dreamer, the house allows one to dream in peace.” – Gaston Bachelard

In the past three installments of our Home Buying 101 Series, we’ve covered the preparation process, house hunting and (most recently), offer writing and negotiating. Congratulations on making it this far! It’s now time to explore the opening of escrow…

Offer Accepted
Bravo! Your offer has been accepted and escrow has opened. Now what?

At this point, the financing should be in place with a stipulation that the home and appraisal are acceptable to the lender. It’s important that there are no changes to the buyer’s financial situation at this point (now is not the time to buy a new car!)

The buyer’s agent will send the lender the executed contract to begin the loan process. A good lender will look over the contract and take note of anything that may cause a red flag in the lending process.

The buyer will send their deposit to escrow within the negotiated timeframe – generally within three days of acceptance. This is also when the buyer will pay for the home appraisal, which determines the home’s value based on similar properties recently sold within a one-mile radius. This is used as protection for both the lender and buyer to ensure that the purchase price does not exceed the appraised value. If the negotiated price is higher than the appraised value, the buyer and seller can renegotiate the price. If the seller is unwilling to come down to the appraised value, the buyer can elect to pay the difference or walk away from the purchase.

A buyer has 17 days to complete the appraisal and 21 days to receive full loan approval, according to the California Association of Realtor’s Residential Purchase Agreement (CAR RPA). The only time this differs is if the buyer and seller have negotiated a different timeframe.

Due Diligence
The buyer must also schedule a physical inspection of the house. In my opinion, these are the most important dollars spent on a home purchase – so don’t be a penny pincher here! It’s better to spend a few hundred dollars on a comprehensive inspection than it is to spend tens of thousands of dollars to fix issues later on.

As an agent, I always recommend hiring a CREIA or ASHI certified home inspector. A quality home inspector will provide an estimation on the age of the hot water heater, HVAC system, roof and more. In addition, the inspector will alert the buyer if further inspections are needed.

If there is a Homeowners Association, this is when escrow will order the HOA documents. These will include financials, budgets, rules and regulations, covenants, conditions and restrictions and 12 months of HOA board meeting minutes. It’s extremely important for a buyer to read through all of these documents to ensure there isn’t anything unsuitable to their lifestyle.

Now that you’ve dipped your toe into the escrow pool, get ready for the last two pieces of this series! The two-part conclusion on disclosures will hit the blog early next month. In the meantime, remember that it’s never too early to seek the advice of a real estate professional and lender. Please don’t hesitate to reach out to me at 619.405.7673 or homes@livininsd.com.

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