Escrow and Closing Information

green info 32What does escrow mean?

Once the seller (or bank) has accepted your offer and the title company has received an earnest money deposit, escrow is officially open. A title company will hold funds and documents until the property is recorded with the county. In some countries or some East coast states, this task is done by a lawyer. During escrow, the title company finds any/all liens on the property so that the seller (bank) can pay them off. Once all liens are removed, a “clear title” is conveyed to the buyer.

green info 32Can I still back out of a deal while we are in escrow?

Yes. Typically there are contingencies in the deal that have to be met in order to close. The most common is “due diligence” which means we have a period of time to do inspections and confirm that we want the property. The second is “appraisal” which means that if your lender appraises the property and it comes in less than the purchase amount, the appraisal is “busted.” A buyer can get out of the deal if we find problems during the inspection OR if the appraisal is busted.

green info 32What are title fees?

Generally these add up to about 2% of the purchase price of the property. Some of these are covered by the seller IF that is stated in the purchase agreement. When you go into escrow, we will provide you with a “net sheet” which breaks down your estimated fees. A few days before we close, you will get an accurate breakdown of costs from the title company.

green info 32Can I choose the title company?

Usually no. Unless the property is privately owned, you will be forced to use the seller’s title company. The good news is that most title company fees are within nickels of each other so this battle isn’t worth fighting.

green info 32How long does escrow last?

Here are some ballpark numbers for you:

Cash Deals (2-3 weeks)
Conventional Loans (4-6 weeks)
Short Sales (6 weeks – 2 years)

green info 32What do we do while we are in escrow?

Stay in touch!!!!! There is a ton of paperwork. If you don’t have a printer and a fax/scanner , we are going to have major problems. There will be about 50 pages worth of documents to be faxed back and forth. Many of these are time sensitive. A $150 scanner/fax/printer can make the difference between the home of your dreams vs what you had to settle for.

  

More Escrow Tips

alert red 100How you hold title will have a significant impact on the escrow process.

You must know how you want to hold title BEFORE we submit offers. Many banks will shut a deal down if the name is changed OR if the title needs to be held in an LLC. We also have to be aware of your marital status. Even if you haven’t seen your husband in 20 years, he will get half of your property if you didn’t get a divorce. Trying to hide a spouse is futile as title companies research names before closing. We lose a deal a year because some mysterious spouse pops up on title radar. If you have questions about holding title, ask us BEFORE we start submitting offers.

green info 32It’s important to understand what the seller / listing agent process looks like.

Listing agents accumulate about 20 offers before they send the top 3 or 4 to the bank. The bottom 4 offers are thrown in the garbage because the agent who made the offer didn’t include proof of funds or the contract was “dirty” – too many weird contingencies. The bank (aka asset manager) will take anywhere from 2 hours to 2 weeks to respond. There is no consistent response time. If you put in 6 offers, you will get a response to each offer about every other day. Your last offer will be dead in about 2 weeks.

green info 32The hardest decision you will make is when the bank accepts your offer.

The accepted offer is very rarely your favorite property. In fact, less than 5% of the time a buyer will get their favorite property. We have seen buyers hold out and throw properties away because they were waiting on their favorite property. They often get their favorite property rejected and have to start the process all over again. NOTE: We will let you make this mistake just once. After that, you willl have to find another real estate company. We have discovered that buyers who can’t make a decision become a liabilty later on.

alert red 100Stand by for a fire drill after you go hunting. DO NOT GO ON VACATION.

Nothing will happen for days and then, BAM, the bank will require you to sign several 8 page documents, wire money, stand on one leg and bark like a dog. This is a major fire drill that many buyers aren’t familiar with and must be handled immediately. You will complain because you will have to drop everything you are doing and run around town to complete this fire drill. This is pure pain and there is no way to avoid it unless you give us limited power of attorney. If you are on a cruise or drinking a margarita in Mexico when your offer is accepted we will probably have to start all over.

green info 32Invest in a high capacity printer / scanner / fax machine.

About every 2 months, a buyer loses a deal because they don’t have the ability to send a 20 page document back via fax or email. Amazingly, these buyers lose deals even after we warned them a million times that they must be able to turn documents around quickly. Isn’t that crazy? These people spend all that time and money looking for properties and then lose the deal because they didn’t invest in a $150 print / scan / fax machine.

green info 32Line up any legal advice in advance if you want them to review contracts.

You will have about 24 hours to read and digest about 40 pages of content. Any accepted offer will include a 20 page addendum that is difficult to read and includes so many disclaimers it makes you wonder why we even start with an 11 page offer. The good news is that most counter offers are focused on process – not price. The bad news is that you have 24 hours to eat that addendum and run to the bank to wire money. If you want someone to read this stuff, make sure they are available for your fire drill. If you want to see a sample contract or addendum, we will be happy to provide one before you go hunting.

green info 32Cash Timeline (most cash deals close in 20 days unless there is a title issue)

Day 1 – Offer Accepted
Day 2 – Funds Wired
Day 3 – Inspection
Day 4 – Property Approved
Day 7 – Title Reviewed
Day 8 – HOA Docs Received
Day 9 – Disclosures Completed
Day 17 – Settlement Statement Approved
Day 18 – Funds Wired
Day 19 – Walk through
Day 20 – Title Recorded

green info 32Loan Timeline – Note: If you have “A” paper, there will be drama and panic around day 30.

Day 1 – Offer Accepted
Day 2 – Funds Wired
Day 3 – Inspection
Day 4 – Property Approved
Day 7 – Title Reviewed
Day 8 – HOA Docs Received
Day 9 – Disclosures Completed
Day 10 – Appraisal Completed
Days 11-28 – Loan Processed
Days 29-31 – Loan Drama
Days 32-34 – Panic, More Drama
Day 35 – Title Recorded

alert red 100Did we mention that you need to stay in touch?

If you go MIA during the escrow process, you will lose your earnest money deposit and have to start over. It’s ok to go on vacation for a couple of days in the middle as long as you can check email or text once a day. If you are not available the last few days, let us know so we can move the close of escrow date to accommodate you. For a cash deal, you will have to wire the balance of funds 3 days before closing.

green info 32Turn utilities on the day you close.

It takes about 3 days for your utilities to turn on. Walking into a dark house with no water is a bummer after traveling a few days in a U-Haul.

green info 32Expect closing delays and secure a hotel before traveling to your new home.

There is less than a 10% chance that your property will close on time. Title companies and lenders are slammed and there is almost always a little glitch at the last minute. We will not be giving you keys until the title is recorded. We don’t care how much you kick and scream, we won’t release keys until it records. We will not lose our license because you needed to move in a day before title closed.