For first-time home buyers, escrow is a process that might seem shrouded in secrecy and it's true that this process can be a bit confusing. Escrow is a stretch of time that begins when a seller decides to accept an offer you have made on their home, and it ends on the day you actually own your new home.
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.
However, this is not your down payment, it is a smaller amount called earnest money, and it simply cements your intention to buy this particular home. The money does get applied to your down payment later on, but temporarily, it just means that you and the seller are in escrow and the seller cannot go into escrow with anyone else. You will even sign a contract to that effect.
Once the money is in the escrow account and the contract is signed, quite a bit begins happening. The bank that is lending you money will appraise the home, and as the buyer, you will be paying for this appraisal. If the appraisal values the home below the purchase price, the bank might not approve loan for the home. While you can argue with the results of the appraisal, it also might indicate that you are really paying too much and might want to either re-negotiate the price with the seller or walk away or find another lender.
In addition to the appraisal, you also will want to have the property inspected carefully. Just like with an appraisal, these inspections generally are paid for by the buyer. You need to hire a home inspector and probably a termite inspector. If you live in any area prone to earthquakes or ground movement, a geologist is another professional who should come out and inspect the home. Of course, in addition to these inspections, the seller must disclose any known problems with 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.
Assuming there are no major issues upon inspection, you will continue further down the path toward home ownership. This means you will need to get insurance for your new home, and you set this up prior to purchasing the home. In some places, you also must get flood insurance. You also must have a title report and what is known as title insurance. This simply ensures that there are no liens that have been placed against the home. A title company might handle this or it might be the escrow company.
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.
However, this is not your down payment, it is a smaller amount called earnest money, and it simply cements your intention to buy this particular home. The money does get applied to your down payment later on, but temporarily, it just means that you and the seller are in escrow and the seller cannot go into escrow with anyone else. You will even sign a contract to that effect.
Once the money is in the escrow account and the contract is signed, quite a bit begins happening. The bank that is lending you money will appraise the home, and as the buyer, you will be paying for this appraisal. If the appraisal values the home below the purchase price, the bank might not approve loan for the home. While you can argue with the results of the appraisal, it also might indicate that you are really paying too much and might want to either re-negotiate the price with the seller or walk away or find another lender.
In addition to the appraisal, you also will want to have the property inspected carefully. Just like with an appraisal, these inspections generally are paid for by the buyer. You need to hire a home inspector and probably a termite inspector. If you live in any area prone to earthquakes or ground movement, a geologist is another professional who should come out and inspect the home. Of course, in addition to these inspections, the seller must disclose any known problems with 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.
Assuming there are no major issues upon inspection, you will continue further down the path toward home ownership. This means you will need to get insurance for your new home, and you set this up prior to purchasing the home. In some places, you also must get flood insurance. You also must have a title report and what is known as title insurance. This simply ensures that there are no liens that have been placed against the home. A title company might handle this or it might be the escrow company.
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 visit the NixonRealEstate.com site today.
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