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You have made the decision to buy or sell your home and, let's face it, the process is often confusing and a little overwhelming. Often, you find yourself giving blind trust to your broker, escrow officer, lender and all the other providers of services throughout the transaction; but it doesn't have to be that way! It is the responsibility of each of these service providers to answer any questions you might have in order to help you understand this sometimes complex process you are going through.
Once the buyer and seller have come to mutually agreeable terms, it is time to open escrow; the process by which ownership of a property is transferred from one party to the other. Though, to the uninitiated, "escrow" may seem complex and stressful, it is important to remember that all parties involved in your transaction have the same objective–to close escrow!
The premise behind a real estate transaction is simple: the seller is selling and a buyer is buying! You may have been told that you don't need an escrow, don't need a lender; you don't need a title policy. However, unless you are a learned expert in these matters, a consumer shouldn't even think about entering into escrow without the professional help from at least some, if not all of these providers.
What can you do to make sure things run smoothly? Here are ten tips that every buyer and seller should know in preparing for a trouble-tree escrow process.
1. CHOOSE AN INDEPENDENT ESCROW PROVIDER---
You have a choice. Remember only independent escrow providers licensed by the california department of corporations are 100% neutral third parties. Their only concern is to monitor the real estate transaction and safeguard trust account funds. Independent escrow providers are specialists whose sole purpose is providing escrow. ESCROW IS THEIR ONLY BUSINESS!
2. SELLERS: ELIMINATE SURPRISES---
If you have judgments against your property and don't say anything to any one, you should know that a search of public records is automatic and will reveal any liens. If you don't let your broker or escrow officer now about potential problems in advance, your escrow will most definitely be delayed.
3. BUYERS: ELIMINATE SURPRISES---
If you have questionable credit, tell your broker or mortgage lender. They know the steps you need to take to clean up your credit. Every lender will require a credit report. Today, many borrowers go through a pre-qualification process before looking for a home. If you are pre-qualified, you know how much of a loan you can obtain and, therefore, how much you can spend on your new home.
4. BE RESPONSIVE---
The escrow officer may periodically contact you requesting pertinent information. There is always a good reason for the request. Just ask the escrow officer if they need more details; then get them the information they need as soon as you can. Remember nothing happens until the escrow is closed. Don’t think, "If I don’t respond, maybe they’ll forget about it."
5. BE PROMPT, BE PREPARED---
If you are obtaining a new loan for the purchase of your property, you should plan on meeting with your escrow officer to sign loan documents before the escrow is closed. This appointment will normally average one hour in length and you should make every attempt to be prompt for your appointment to avoid having to wait. This is an important step in the escrow process, requiring your attention, so unless it is unavoidable, it is suggested that young children requiring your attention or causing a distraction not be brought along for your appointment. Remember: you must have valid picture identification with you at the time of signing for notary purposes and all persons taking title will need to sign the loan documents.
6. INSURANCE---
Unless you are purchasing a condominium unit or paying all cash for a property, you will need to obtain fire insurance coverage for the property you are buying and the escrow holder is required to pay the first year’s premium through escrow, at the close. Contact your insurance agent to discuss the transaction and, when you have determined the type of policy you need and the agent you will use, notify your escrow holder with that information. The escrow officer will then provide the agent with any further information needed and order the policy for you. Don’t leave this until the last minute; you should make this determination early in the escrow process to avoid delays.
7. WALK-THROUGHS---
Make sure you have completed all walk-throughs, inspections and other contingencies such as termite inspections and any required city permits. Many things can delay the close. Be informed and prepared.
8. DOCUMENTS---
To expedite the escrow closing, bring the following items with you to your appointment:
- Buyers & sellers -- drivers license or passport (photo id)
- Buyers only -- the name and address of your homeowners insurance agent
- Sellers only -- if your home is a condominium, make sure you have a copy of the homeowners association information and documentation -- sellers existing lien information
9. MANY PEOPLE ARE INVOLVED IN MOST REAL ESTATE TRANSACTIONS---
It takes cooperation and communication between all of these entities to ensure a smooth escrow close. A positive outlook and a quick response to anything asked of you will encourage this cooperation. Many things can hold up an escrow–make sure you are not one of them!
10. HOW CAN WE PREPARE FOR ESCROW?
Communication is the key to limiting the stress and pressure of obtaining loan approval, processing escrow and planning a move. Common closing delays are caused in the following areas:
- If any of the buyers or sellers will be out of town prior to the escrow closing date, contact your loan processor and escrow officer to discuss scheduling.
- (BUYERS) do not incur additional debt; change your employment status during the escrow process, etc. Your credit and employment may be verified by the lender again as late as the day before closing.
- (BUYERS/SELLERS) valid picture id required for closing document notarization (i.e. Current drivers license, state id, passport)
- (BUYERS) apply for homeowner insurance coverage right away; don’t wait until the last minute as coverage availability may be limited. (if you are purchasing a condominium, this is not necessary)
- (BUYERS) all closing funds must clear the escrow trust account before escrow closing (wire transfers usually clear within 2-6 hours of origination; California cashier’s checks usually clear 24-48 hours after deposit.)
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