Closing on a home is the incredible prize that many homebuyers dream of from the day they first begin to search for a house. But, as experienced homebuyers know, it is not just as simple as picking up the keys once you agree to buy the home! For instance, what happens at the close of escrow?
Here’s the truth: There is an escrow journey that must be completed before you can ever consider a real estate purchase complete. The close of escrow can be an intimidating process that may leave you unsure of what to expect.
Don’t fret! We want you to feel confident in your understanding of the close of escrow process, so take a look at this guide to everything you need to know!
The close of escrow marks the completion of all legal responsibilities related to a home sale. Almost all real estate transactions result in a close of escrow.
Think about it as the moment in the real estate transaction when both buyer and seller have fulfilled their obligations to one another. At this point in the process, the home title passes from the seller to the buyer. The buyer gets the keys and the seller receives the money for the sale.
This close of escrow process also includes the conclusion of final settlement calculations and the distribution of payments such as:
This is part of the reason that the close of escrow is not one size fits all.
For instance, obstacles may arise from delays, title issues, or contingencies. Either party may select certain preferences that alter the closing dates. Plus, a major variable is the length of time needed to complete the close of escrow.
The entire close of escrow timeline usually takes 30 to 60 days.
Let’s discuss one quick clarification before moving forward: The close of escrow and the actual closing date are NOT always the same date! They could be the same day if the seller is present for your closing. Or it could be totally different!
Let’s break this down with an example. On Monday , the legal and financial transactions are complete, so the close of escrow is complete. But, the buyer does not yet have the title, deed, or keys to the house. That step is scheduled for Friday. In that case, Friday is your closing date !
This clarification helps to have under your belt first so there is no miscommunication. Now, let’s talk about the steps involved to reach the close of escrow.
Time to get started! After you sign a purchase agreement to buy a home, the real fun begins. There are 6 steps to complete before you reach the close of escrow.
To kick things off, the buyer provides the initial deposit, also known as the earnest money deposit . These funds act as proof that the buyer intends to complete the home buying transaction.
The initial deposit money then goes into an escrow account, officially launching the next paperwork steps.
Next, the seller must complete a seller’s disclosure. This legal document outlines the full conditions of the property that they are selling.
Then, the buyer will approve the seller’s disclosures. Keep in mind that this step could cause potential delays if the buyer is surprised by new information that is included in the disclosure!
Inspections can be stressful, but they don’t have to be! Common inspections that may be necessary at this point in the close of escrow process could include:
The home inspection is an intensive evaluation where every aspect and system of the house is reviewed. Inspectors check the air conditioning, plumbing, structural components, the roof, and much, much more.
If there are any issues or if home inspection results come back as negative , it may be time to consider a contingency for the transaction. This could trigger a delay in the close of escrow.
If there are no issues after the home inspection, then that’s one more step you can check off your list!
It’s time to get out your reading glasses! Both buyer and seller need to take the time to closely review the important documents associated with finalizing the home sale.
Here are some of the documents you can expect to check over:
This is a good time to communicate closely with your real estate agent or attorney if you have any concerns or confusion. They are an invaluable resource to you because the close of escrow is not too far off.
The final walkthrough is the buyer’s chance to take one final look at the property!
This is the last chance to inspect the home. For instance, buyers should check that the light fixtures, appliances, and water all are working correctly. If you requested repairs earlier in the close of escrow timeline, this is your opportunity to review those and make sure there’s no new damage.
Typically, the final walkthrough occurs in the 24 hour period prior to closing. Any concerns discovered at this stage need to be addressed immediately so you can pause the transaction before it’s too late.
At last, the close of escrow timeline ends here. But first…more signatures!
No surprise here. The buyer and seller still have more documents to sign at the closing. Paperwork may include title forms, the deed of trust, transfer of tax declarations, closing disclosure, and proof of insurance.
At this time, the buyer will also need to submit the down payment and closing costs for the home purchase.
To speed things up, look for a digital escrow company to reduce the paper needed. Depending on your state laws, you can make the close of escrow process entirely virtual.
If you want to discover more about the escrow process, contact us at New Venture Escrow today. Our team of escrow experts is here to offer you a seamless digital escrow process from beginning to end!
