You might be aware that escrow occurs from the time your offer to a seller is accepted to the minute you actually own the home, but what happens between this time is often a mystery to home buyers, particularly a first-time buyer. Read on and uncover the mysteries of escrow.
Escrow technically refers to the third party that handles all of the real estate documents and deals with the money that changes hand during the selling process. To start an escrow, you open an account and give the escrow company a check.
This check is not usually cashed and basically just holds the property for you. By giving this check and signing a contract with the seller, it locks you into escrow together. The seller can accept backup offers but cannot go into escrow with anyone else. The check you give the escrow company eventually will be used to cover a portion of your down payment.
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.
Inspections take place during escrow near the beginning days of this period. Inspections are hugely important and it is essential that you hire the best quality inspectors available. They will inspect every inch of the home, including any basement, the attic areas, the outside of the home and the roof. They will test the faucets, electrical outlets and look for issues such as mold or evidence of foundation problems or water damage. You also should have the property inspected for termites and possible have a geological report completed. Geologic reports are a good idea in areas prone to earthquakes or ground movement or if you notice a plethora of cracks inside the home.
It would be rare to receive an inspection report that doesn't have at least a few minor issues on it. No matter how well the home has been maintained, there can always be a few problems. It might be as simple as the need to upgrade a bannister to current safety standards or perhaps a leaky window. Big issues include major termite damage, a roof that needs to be replaced or the presence of mold. If the report shows major problems, you have a few choices. You can simply walk away from the deal or you can ask the seller to either fix the problems or put money in the escrow account for repairs. You also can ask the seller to lower the price of the home.
A few other items that you need to deal with during escrow include securing homeowner's insurance. In addition to regular insurance, in some areas you will need to purchase flood insurance. You also might consider earthquake insurance if that's a potential issue in your area. Title insurance and a title report also must be purchased and obtained. Sometimes the escrow company handles title issues, and sometimes a title company completes this process.
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.
Escrow technically refers to the third party that handles all of the real estate documents and deals with the money that changes hand during the selling process. To start an escrow, you open an account and give the escrow company a check.
This check is not usually cashed and basically just holds the property for you. By giving this check and signing a contract with the seller, it locks you into escrow together. The seller can accept backup offers but cannot go into escrow with anyone else. The check you give the escrow company eventually will be used to cover a portion of your down payment.
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.
Inspections take place during escrow near the beginning days of this period. Inspections are hugely important and it is essential that you hire the best quality inspectors available. They will inspect every inch of the home, including any basement, the attic areas, the outside of the home and the roof. They will test the faucets, electrical outlets and look for issues such as mold or evidence of foundation problems or water damage. You also should have the property inspected for termites and possible have a geological report completed. Geologic reports are a good idea in areas prone to earthquakes or ground movement or if you notice a plethora of cracks inside the home.
It would be rare to receive an inspection report that doesn't have at least a few minor issues on it. No matter how well the home has been maintained, there can always be a few problems. It might be as simple as the need to upgrade a bannister to current safety standards or perhaps a leaky window. Big issues include major termite damage, a roof that needs to be replaced or the presence of mold. If the report shows major problems, you have a few choices. You can simply walk away from the deal or you can ask the seller to either fix the problems or put money in the escrow account for repairs. You also can ask the seller to lower the price of the home.
A few other items that you need to deal with during escrow include securing homeowner's insurance. In addition to regular insurance, in some areas you will need to purchase flood insurance. You also might consider earthquake insurance if that's a potential issue in your area. Title insurance and a title report also must be purchased and obtained. Sometimes the escrow company handles title issues, and sometimes a title company completes this process.
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 likes reading real estate blogs. If you are searching for licensed Fredericksburg TX real estate agents, or to discover Fredericksburg homes for sale, please check out the Nixon Real Estate site today.
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