Many home buyers are confused by the seemingly complicated and drawn-out process of buying a home. A particular area of confusion seems to revolve around the escrow process.
Once you or the agent working on your behalf has made a purchase offer on a home you are interested in, the offer must then be accepted by both parties. This happens in what is known as escrow. The escrow process is controlled by a third party who manages each step that is necessary to complete the sale, including the completion of disclosures, titles search, insurance, inspections of the property, pest inspections, and more.
The escrow process can last from a few weeks to a couple of months and is dependent upon a number of factors, including the desires of the seller and buyer, the timetable for funding, and other considerations.
Real estate agent usually monitors the escrow process and keep the home buyers informed on how the escrow is proceeding, and when a step arises that requires your attention. Once everything is completed during the escrow process, the funds will be distributed to the seller and you will be given the keys to your new home.
- Escrow agent receives the purchase and sale agreement from the Realtor. A new file is opened. The escrow agent will then send initial instructions on escrow to the seller and the buyer and may request more information about the transaction. The Realtor handles all information requests.
- After receiving a preliminary title, escrow will mail the title to the parties. Escrow agents will then begin to clear off any mortgages, liens, judgments and so on from the title.
- The escrow agent will prepare the necessary documents that are needed to close the sale, including the warranty deed, settlement statement, excise tax affidavit, and any documents that are required by the IRS.
- Escrow will typically receive the loan document from your lender about four days prior to closing.
- The escrow agent will prepare a settlement statement that reflects items like the loan charges to the buyer and so on and will copy these documents for the buyer and prepare the entire file for final signing. An appointment will be made for the seller and the buyer to meet to sign the closing papers. At this time, the escrow agent will advise the buyer, if prior advisement has not been made, about the funds needed to close the sale.
- Seller and buyer will sign closing documents and the buyer will make the dispensation of closing funs. The buyer will sign a couple of days prior to closing.
- The loan documents will be sent from escrow to the lender for review and will send the deed or deed of trust to the title company. The title company will hold on to the title until the sale is closed.
- The lender will review the documents and approve them. After approval by the lender, the escrow agent will grant permission for the title company to record the documents.
- The escrow agent will receive the funds for the lender via a wire transfer. Escrow will then receive a recording number from the title company that indicates that the documents have been recorded. This signifies that the closing has been made.
- Escrow will then disburse funds to the lender. A final settlement statement will be sent to all parties involved.