For first-time home buyers, escrow is a process that might seem shrouded in secrecy and it's true that this process can be a bit confusing. Escrow is a stretch of time that begins when a seller decides to accept an offer you have made on their home, and it ends on the day you actually own your new home.
Basically, the term escrow refers to the fact that a third party or escrow company will be handling the money and real estate documents that must be dealt with in order to transfer ownership from the seller to the buyer. The process begins by opening an escrow account with your escrow company, and in this account, you provide a set amount of money.
However, this is not your down payment, it is a smaller amount called earnest money, and it simply cements your intention to buy this particular home. The money does get applied to your down payment later on, but temporarily, it just means that you and the seller are in escrow and the seller cannot go into escrow with anyone else. You will even sign a contract to that effect.
After you have started up the escrow process, several important things must happen. Your bank or financial institution that is lending you money will appraise your home, and the cost of this appraisal generally is paid for by the buyer. If the appraised value of the home is less than the selling price, the bank might not give you a loan. You can argue the point and even get a second appraisal, but if the appraisal value is lower, it means that the bank and probably you will be paying more than the home is truly worth.
In addition to the appraisal, you also will want to have the property inspected carefully. Just like with an appraisal, these inspections generally are paid for by the buyer. You need to hire a home inspector and probably a termite inspector. If you live in any area prone to earthquakes or ground movement, a geologist is another professional who should come out and inspect the home. Of course, in addition to these inspections, the seller must disclose any known problems with the home.
It's unlikely that the inspector won't find at least a few little issues, but often they are fairly minor and can be repaired easily. The seller might even fix a few of them prior to moving out, if you ask. However, if the home has mold or termites or a bad roof, these are very serious issues and you need to think about your options. These problems can be fixed, but usually at a pretty high cost so you will either want to ask the seller to make repairs or put money in the escrow account to cover the cost of the repairs after closing. If the seller won't negotiate, you have the option of continuing the escrow anyway or canceling the contract and looking for another home.
You will need to acquire homeowner's insurance and possibly special insurance on top of general house insurance. This might include flood insurance or perhaps earthquake insurance. You will also need to get the title report and title insurance. This report is completed either by your escrow company or a separate title company and seeks to make sure there are no liens against the property.
Escrow might seem endless, but usually it only lasts about 30 days or so, although it can be extended by weeks or months. In the days immediately preceding the close of escrow, you will get the opportunity to walk through the home for a last inspection. You will visit the escrow company and sign a myriad of papers and on that last day, the lender will provide the money for your loan, which effectively pays off the seller and transfers ownership to you. The staff at Nixon Real Estate not only can help you find great options for Texas Hill Country real estate, especially Fredericksburg real estate, they also can answer many of your questions regarding escrow.
Basically, the term escrow refers to the fact that a third party or escrow company will be handling the money and real estate documents that must be dealt with in order to transfer ownership from the seller to the buyer. The process begins by opening an escrow account with your escrow company, and in this account, you provide a set amount of money.
However, this is not your down payment, it is a smaller amount called earnest money, and it simply cements your intention to buy this particular home. The money does get applied to your down payment later on, but temporarily, it just means that you and the seller are in escrow and the seller cannot go into escrow with anyone else. You will even sign a contract to that effect.
After you have started up the escrow process, several important things must happen. Your bank or financial institution that is lending you money will appraise your home, and the cost of this appraisal generally is paid for by the buyer. If the appraised value of the home is less than the selling price, the bank might not give you a loan. You can argue the point and even get a second appraisal, but if the appraisal value is lower, it means that the bank and probably you will be paying more than the home is truly worth.
In addition to the appraisal, you also will want to have the property inspected carefully. Just like with an appraisal, these inspections generally are paid for by the buyer. You need to hire a home inspector and probably a termite inspector. If you live in any area prone to earthquakes or ground movement, a geologist is another professional who should come out and inspect the home. Of course, in addition to these inspections, the seller must disclose any known problems with the home.
It's unlikely that the inspector won't find at least a few little issues, but often they are fairly minor and can be repaired easily. The seller might even fix a few of them prior to moving out, if you ask. However, if the home has mold or termites or a bad roof, these are very serious issues and you need to think about your options. These problems can be fixed, but usually at a pretty high cost so you will either want to ask the seller to make repairs or put money in the escrow account to cover the cost of the repairs after closing. If the seller won't negotiate, you have the option of continuing the escrow anyway or canceling the contract and looking for another home.
You will need to acquire homeowner's insurance and possibly special insurance on top of general house insurance. This might include flood insurance or perhaps earthquake insurance. You will also need to get the title report and title insurance. This report is completed either by your escrow company or a separate title company and seeks to make sure there are no liens against the property.
Escrow might seem endless, but usually it only lasts about 30 days or so, although it can be extended by weeks or months. In the days immediately preceding the close of escrow, you will get the opportunity to walk through the home for a last inspection. You will visit the escrow company and sign a myriad of papers and on that last day, the lender will provide the money for your loan, which effectively pays off the seller and transfers ownership to you. The staff at Nixon Real Estate not only can help you find great options for Texas Hill Country real estate, especially Fredericksburg real estate, they also can answer many of your questions regarding escrow.
About the Author:
Pammy McGrath enjoys reading real estate blogs. If you are searching for licensed Fredericksburg TX real estate agents, or to find Fredericksburg homes for sale, please check out the Nixon Real Estate site now.
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