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Close of Escrow

09 Dec

Step 16

Congratulations!  Escrow has closed!

You’ve been waiting for your Realtor to say this for the last 30 days!  Your lender has “funded the loan” for your new home and escrow has reported to your Realtor that the grant deed has been recorded at the county recorder’s office.  That event signals that Escrow has closed!

It seems that this time period has lasted forever but soon it will be a story that you will be sharing with your friends and family for years to come – you survived buying a Home!  You have accomplished the All American Dream of Home Ownership!

Hope you have been packing because tomorrow is moving day!

 

 

 
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Final Walk Thru

05 Dec

Step 15

About 5 days before the close of escrow, your Realtor will schedule a walk thru of the home.  The purpose of a walk thru or verification of property condition is to establish that the property is in similar condition to when your offer was accepted.  If it is a standard sale with the Seller still living in the home, the landscaping should have been kept up and the home in good condition considering the owners are in the moving process.  The walk thru is also a time to see that any agreed upon repairs are complete. The part I like best about a walk thru is that the Buyer and Seller are usually more relaxed and can talk about the house and how things work.

If the home is a short sale or REO (bank owned home) then things are quite different.  There have been no repairs or regular maintenance done to the home during escrow so you hold your breath as you enter the home and hope that it has not gone down hill any more than on the day your offer was accepted.

 

 
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Signing Loan Documents

21 Nov

Step 14

So at this time you are about 3 weeks in to the escrow process. The home inspection has been completed and any repairs needed to the home have been agreed upon by the you and the Seller. The lender has ordered an appraisal and it has come in at the agreed upon price and the conditions of the loan are being taken care of by the lender. You have approved the disclosures and signed all escrow documents. You have scheduled your tentative move date.

Escrow will call you approximately 5 days before the close of escrow date to schedule an appointment to sign the loan documents. It is always nice to have your Buyer’s agent present for this appointment so don’t hesitate to ask. Many agents will try to coincide the “walk thru” on the same day as you sign loan docs. That way you know that you are about 5 days away from closing your escrow.

 
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What is Escrow?

18 Nov

You hear the word Escrow over and over when talking about buying a house but what is it anyway?

I like to describe escrow as a neutral third party that is in charge of gathering and dispensing information about the home purchase. They work for you so if you have any questions, please call the escrow officer. They will be happy to answer questions.

Most escrows last 30 days, “Time is of the essence” is the rule of thumb. Gone are the days of 60-90 day escrows. The sooner escrow can close, the better. Escrows on bank owned homes are also as short as possible. Now of course if your escrow involves a short sale – who knows when that escrow will close!

Escrow will gather title information about the property, insurance information, homeowner’s association information (if it applies), lender and loan information. Escrow will check on the progress of the loan and report on it to the agents. Escrow will also gather all funds – from the EMD (Earnest Money Deposit) to the down payment and loan funding money. Escrow instructions are given to both Buyer and Seller to be signed and returned. There is a lot going on at Escrow!

Escrow also can change terms of the contract for the Buyer and Seller however the change will have to be in writing and agreed upon by both parties. One party cannot make a change without the other one knowing about it. For example, if the Sellers need to change the date of the close of escrow, they will need to write a letter to escrow asking for the date change. If the Buyers agree and sign the change of date form, then it happens.

What act signifies the “Close of Escrow”? The recording of the Grant Deed with the County Recorder with the new owner’s name on it! And the best part – Escrow will be the one to call your agent with the good news – Escrow has closed!

 

image courtesy of lynnchuba.com
 
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Home Appraisal

14 Nov

Step 13

As soon as you have acceptance of your offer, your lender needs to be notified so that he can order an appraisal.

The appraisal process has changed in the last couple of years. Let’s suffice it to say that the appraiser is randomly picked from a pool of appraisers.

The appraiser will meet with the listing agent at the property. They measure the dwelling and inspect the neighborhood and recent sales. The buyer will be given a copy of the appraisal.

Once the appraisal is back at the lender’s, the lender will put in motion the final “conditions” of the loan process.

Should the appraisal not come in at the agreed upon price, then that opens up negotiation again. Both Seller and Buyer will have to agree to go with the appraised value or escrow “falls out”.

 
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Home Inspections

11 Nov

In California, the real estate contract allows a 17 day time period after acceptance of the offer for the Buyer to do any and all inspections. Of course, the inspections are at the Buyer’s expense.

Buyers are encouraged to hire a licensed home inspector to do a general inspection of the home they want to buy. Ask your Realtor for at least 3 or more names of inspectors that they recommend. The general home inspection can lead to other inspections. For example, if the home inspector finds the air conditioner to not be working to its fullest potential, they will recommend further inspection by a qualified HVAC technician.

Yes, it can get pricy but it is the best way to evaluate the condition of your future home. In my opinion, it is better to spend $300-700 on inspections to determine if the house is worth buying than to find out 6 months after you move in that you have bought a “money pit”.

 
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Multiple Offers

09 Nov

I sort of skipped over the multiple offer situation but would like to talk about it now.

For most of my career in real estate in the Inland Empire I have been more of a Buyer’s agent. During these years what I have experienced is multiple offers on most homes for sale.

There is a huge demand for homes and the proof is the fact that every time, and maybe you think I’m exaggerating but it is true, every time I write an offer there are other offers on the same house. It doesn’t matter the price of the home, it can be $125,000 or $950,000 and there are more than one offer that my Buyer has to compete with. So that is the word I want you to remember – compete.

Because the number of homes for sale is low, the demand is high, there is no place for low-ball offers. If the house proves to be well priced, then offer your best. Especially when you are dealing with a bank owned home. The bank will always come back to the listing agent and ask for “Highest and Best”.

Yes, I know you say you don’t want to get in a “bidding war” but if you want to buy a home in this area, you will be competing. Read some of my earlier posts and you will find that competing is not only about price but the terms of your offer.

 
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Contingencies

28 Oct

Step 11

I thought I would go a little more in depth about the contingencies that are a part of the California Purchase contract.

Inspection contingency – If there is a problem with the house such as something not working properly, you as the Buyer will be advised by your Buyer’s agent to ask for repairs to that item. This works for a standard sale, not a short sale or bank owned home, they for the most part will not repair anything. Also, the Seller will give you disclosures about the property. Read them all as the disclosures are very important. If there is something disclosed by the Seller of the property that you do not agree or like, then tell your Realtor that you want to withdraw your offer. Be sure to do this by the 17th day, after that you might lose your deposit money.

Appraisal contingency – the property must appraise at the value (price) agreed upon. If the appraisal comes in higher, then you are lucky but if it comes in lower then it opens up negotiations again. Hopefully this won’t happen but if it does, your Buyer’s agent will need to go to bat for you. This is a critical point. Sometimes the Seller will not accept a lower price.

Loan contingency – the lender that you have chosen to give you a loan is doing their part to obtain financing on the home. They are also concerned with the appraisal. If there is a discrepancy in the value then the lender will have to wait to see if you and the Seller can agree so they can proceed with the loan process. During escrow the lender checks and double checks again just before the close of escrow on your employment and FICO scores – so stay employed and don’t run up any bills!

 
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Acceptance of Your Offer

24 Oct

Step 10

After negotiating the details of the offer, you have what is referred to as Acceptance. The date of acceptance is the key to escrow. The date of acceptance will be used and referred back to throughout escrow.

For example, 17 days after the date of acceptance, is the time allowed for in the contract(California contract) for you as the Buyer to conduct all inspections of the property. This is very important because at the end of the 17 day period the Seller will ask you to remove this contingency.

Let’s talk about contingencies, there are 3. You have the inspection contingency, the appraisal contingency and the loan contingency. This means that the house needs to pass inspection, the appraisal has to come in at the agreed upon value and the loan must be in place and ready to “fund” by your lender of choice. If any one of these contingencies do not happen, then the escrow “falls out” – no sale. Now you know what it means when you hear that a house has “fallen out of escrow”!

 
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The Counter Offer

17 Oct

Step 9

Expect to receive a counter offer from the Seller. In 15 years of writing offers for Buyers, I have only had maybe a dozen original offers accepted as written.

The most common thing that is countered by the Seller is the price.

Some of the other terms of the contract that can be countered is the amount of time for escrow. 30 days is the most common escrow length but sometimes the Seller wants to close escrow on a specific date. The Seller will also counter the escrow and title company that they will want to use. It is customary in this area for Sellers to use the escrow and title company of the listing agent.

If you have written an offer on a bank owned home – REO – then the bank will send you a counter offer that looks like an offer and can be 15-20 pages long. Don’t be alarmed, this is the way they do things. If you have written an offer for a short sale then be prepared to wait as the bank will want to do an appraisal before issuing a counter offer. If you have written an offer on a standard sale home then the Seller will most likely respond within the 3 day time limit that is stated in the contract.

Something that has been happening in the last year or more with REO’s and short sales is that they will counter back that they do not want to pay for any termite work or home warranty. Again, the banks are trying to increase their bottom line any way they can. So buying a bank owned home or short sale places more responsibility on the Buyer because the Buyer will need to pick up these fees.

Next blog post: Multiple Offers

 
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