Understanding the Process: What Happens After You Open Escrow
So you accepted an offer on your property. Now what? Once all the initial terms and conditions of an offer, from a buyer, has been agreed upon by both the buyer and seller you “Open Escrow”. This means the Purchase Agreement and all additional documents are sent to an escrow company. Getting to this stage in the transaction and accepting an offer isn’t just about the price. In order to open escrow ALL the terms and conditions need to be agreed upon.
So, Quick Review: this includes details such as: When escrow will close. How long does a buyer have for inspections, an appraisal, a full loan approval, for example. What kind of City inspections are agreed upon and who is going to pay for them? If it is a condo or townhouse, what are the expectations around Home Owners Association documents and financials?
The escrow company is a neutral party in the transaction, meaning they don’t represent either side in the transaction. So the documents are submitted to escrow, they then write up and monitor the agreed upon, and contractually binding, details of the sale in what is called “escrow instructions”.
It is my job and responsibility, as the Realtor, to monitor all of the timelines and agreed upon terms, for my client, during a transaction. In addition to always keeping you as the client updated, we need to be in close communication with all the parties that are necessary to get to a close. This includes: Title company, escrow, inspectors, the lenders, ect. To miss a deadline or not follow through on the details agreed upon in the contract does not best represent you, as the client.
We, as agents, have a fiduciary duty to protect your best interests. This is required from the beginning to the end. Now, if I am representing the seller, I have no obligation to protect or represent the buyer in any capacity. That is their agents job. Or, on the flip side, if I am representing the buyer, I then am negotiating on their behalf and protecting their best interests. Strong negotiations on their behalf and meeting deadlines by doing our due diligence is the best way to make this happen.
Ok, so getting back to the basic steps that happen once escrow is open…
Much of these steps happen simultaneously.
Earnest Money from the buyer, to secure the buyers offer in escrow, is due within 72 hours of acceptance.
Disclosures: The Seller is required to provide disclosures on the property. This gives the seller an opportunity to share with the buyers everything they know about the property. Were there upgrades, what is being transferred with the property? Were repairs done? Have there been any insurance claims? The more transparent the better. As a seller, it is best to reveal everything that’s know about the property.
Inspections are recommended during any real estate transaction. The purpose of a Physical Inspection is for the buyer to ascertain that the property meets their expectations NOT for an opportunity to renegotiate the price. However, it may be another negotiation point in the transaction. A Physical Inspection is the usual first step. If further investigation is recommended then the buyer, during the designated time frame, has the option to bring in further experts for inspections. A plumber for example, or roofer, a termite guy or an electrician may be recommended to provide more information.
Appraisal: When escrow is opened the lender is notified and an appraisal is ordered. A good listing agent will be prepared to share the details and value of the property since they are well versed in the amenities. The appraisal could also be a point of negotiation on behalf of the client.
At the same time all of the above is happening, the Agent will work with a Title company that pulls a report confirming the title is clean and there are no liens on the property. If issues are revealed, we work to resolve them and confirm there is a clean title prior to closing.
Escrow instructions, like we talked about earlier, are written up and distributed to the buyer and seller. The instructions are a reiteration of the agreed to Terms and Conditions from the Purchase Agreement. They need to be reviewed in detail to confirm that the terms are as agreed upon and acceptable. Then they need to be signed and returned. The seller has a few more steps to this process and we can walk you through that at the time.
Natural Hazard Disclosure Reports are ordered. This report will notify a buyer if they’re in a Flood Zone. There are earthquakes in California, (Surprise) is there oil drilling under or near the property? And so much more. This is really important to know that happenings in and around the property.
City Inspections are required in certain parts of town. A well versed agent knows which ones and who to call.
If it is a condo or townhouse, we work with the Home Owners Association for their Rules, Regulations and Financials.
As we have met the above deadlines and contingencies are signed off accordingly, we are getting closer to the end of the transaction. The Lender will then confirm all conditions are signed off and usually does a recheck on the buyer prior to funding. This is why you don’t want to make any large purchase during escrow. I had one family buy all their new appliances and furniture during escrow. The purchases were so much that it tipped the scale so far as their debt to income ratio and threw off the deal. Needless to say, we had to make adjustments accordingly but eventually got it back on track and closed. Sometimes learning experiences can be a little painful.
A Closing Disclosure is then issued. This itemizes the expenses. It needs to be reviewed in detail as well.
Assuming all is good, then you send in the balance of your down payment, to include closing costs. It is so important to account for closing costs.
The lender funds their share
And the Title then transfers from sellers to buyers for the Close of a successful escrow and keys are exchanged.
Now, this is a summary of the overall happenings. So many details go into any and every transaction. The attention to details is what really makes a sale a success. A seasoned agent just gets it all handled with as much finesse as possible because we know that selling or buying a home is a very stressful time and we want to make it as seamless as possible. As a seasoned agent, I align myself with a Team that check all the boxes, cross the Ts and dots the Is.
You, as the client, should be the primary concern and when the seller hands over keys so they can move onto the next great adventure in their lives, we want it to be looked back on as a positive transaction. My Team and I work really hard to make that happen.