The term opening escrow might seem a little odd but you've probably heard the term "close" when referring to closing on a house. Well, the opposite is opening escrow versus closing escrow.
What is escrow?
The term escrow refers to 1/3 party that's hired to handle a properties transaction. It handles the exchange of money and any related documents. Escrow will only come into play once both parties have reached a mutual agreement on an offer. Once everybody agrees, escrow can be opened and we move on with the transaction. The term "being in escrow" is a legal term used when real property requires a transfer of title. The escrow company or title company will handle a lot of the minor details that are imperative to the transaction going through. They sort of act as a middleman to complete the deal.
When does escrow actually open?
When you find a property you like you and your real estate agent will write up an offer. That offer will state various details such as the property address, buyer and seller, different parties involved in the transaction, how much is the down payment and the earnest money deposit. The offer is then sent to the seller.
If the seller agrees to all the terms in the offer, they will sign the document and the earnest money will get deposited either with the real estate brokerage or the title or escrow company, essentially "opening escrow". If the seller does not agree to all of the terms in the offer, a counteroffer will be submitted back to the buyer altering or changing some of the terms. This negotiation can go back and forth and telling mutual agreement has happened. There are typically three-day waiting periods between the back-and-forth counter offers but should this expire, both the buyer and the seller have terminated the transaction automatically.
However, if either party decides to resurrect the deal, new conditions can be made and the transaction can continue to negotiate or move forward. Once both parties agree to all the terms in the offer and have signed off on it, only then does the earnest money get deposited, opening escrow.
What happens after escrow is opened?
Once the earnest money is deposited, the transaction moves on to pending. It is at this time that everybody really gets down to work. Your lender will start finalizing any financing documents, pulling credit reports, verifying income and assets and the title company will get to work verifying that the seller has a legal right to sell the property. Closing costs such as title insurance policies, courier fees and escrow fees are all lumped together and the buyer shall receive a good faith estimate pricing out all of these detailed costs.
Escrow will also complete a set of requirements, or basically a "to do" list. They will carry out the transaction, call the buyer or seller if there's any discrepancies, errors, or questions, and collect all the documents necessary to close on the property or hand over the deed and title to the new owner.
What should a buyer and seller do right now?
Now is the time for buyers and sellers to finalize everything on there and to prepare the move. Sellers should start packing up and buyers can start preparing to leave their existing home. Be sure to answer any questions that might arise from escrow, title, or your lender during this time period. Any delay could set back your closing date.
When do I get the keys?
Once the home inspection has been satisfied and everything has moved on to the final closing, the seller will be notified first to come into the escrow or title company and sign all of the final documents. An hour or two later, the buyers will go in separately and signed their portion of the contract.
Here's the chance to ask any final questions or clarification on all of the documents. Get your writing hand ready because you'll be signing your name about 30 to 40 times.
Once all of the documents have been signed and finalized, all of the documents are sent to the county in which the property is located to file the deed. Once the deed is recorded and money is disbursed from the escrow company to the seller, only then can the buyer's agent had over the keys. This means that closing has happened and you can move in. This is typically between 1 to 4 days after that document signing.
Opening escrow is a big deal and an imperative part of the home buying process. While it might seem confusing, it should give you a bit of peace of mind knowing that there is a company that does this all of the time. Let them handle all of the documents and simply answer their questions when needed. There are a lot of parties involved in a real estate transaction and it helps to know what each party does so that you can be hands-off and enjoy the ride.
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