Get the Keys to Your New Home
Congratulations, you are on your way to owning your very own home! Be sure to follow your Realtor's advice so that escrow and settlement go as smoothly as possible.
The period that you are "in escrow" is the time between when a contract is ratified and when the transfer of title is recorded. The standard escrow period is often 30 days, but may be longer or shorter depending on how quickly each of the required escrow tasks can be completed.
By the time you have opened escrow, you have come to an agreement with the seller on the closing date and the contingencies. During escrow, each contingency specified in the contract must be completed satisfactorily. Each contract is different, but most include the following contingencies:
- Inspection contingency: typically you have 5-10 days to conduct all the inspections you desire on the property. The most common is a formal inspection by a licensed inspection agent, who will provide you a full report of the property. You’ll have until the inspection contingency deadline to decide if you would like to move forward, ask the seller for repairs or a credit so you can make repairs, or cancel the contract
- Financing contingency: once the contract is signed, you have a specified period of time to secure funding. If, for any reason, you are unable to secure funding during the period of time granted to you by the contract (and the seller will not provide a written extension of time), you must decide whether you want to remove the contingency and take your chances on getting a loan or cancel the purchase contract. If you’re getting a loan, the loan officer will provide a written commitment that confirms you will be able to get a loan for that property. In lender terms, this means going through the underwriting process
- A requirement that the seller must provide marketable title: The third party company handling escrow will run a comprehensive title check and send you a report that confirms the title exists, the sellers are legally allowed to transfer title, and whether any judgements or liens exist that will need to be paid off before closing. Once all of those boxes are checked, the title is considered “clear” and can be transferred to you. You will have a chance to negotiate or cancel the contract if the title report comes back with any “clouds” or legal issues
Now that you’ve cleared the inspection contingencies, you’re clear to move to closing. In the remaining time before the closing date, your Realtor and the Title company will get paperwork finalized, the lender will button up your loan, and you’ll receive a preliminary closing statement that will detail all costs associated with the purchase. There are several steps you should take in this period to set you up for a smooth transition:
Budget for closing costs and your Earnest Money Deposit. Once a contract is ratified, your Earnest Money Deposit check will be cashed, so you should make sure there’s enough money in the account you wrote it against. That EMD deposit will go toward your closing costs. At the closing table, you’ll need to provide a check for closing costs and a down payment. You can choose to put down as much or as little as you want depending on your mortgage, but remember, the more you put down toward the total price of your home, the less time it will take you to pay off and the less your mortgage payments will be every month. Check out our Guide to Closing Costs for more info.
Secure homeowner's insurance. Proof of your Homeowner’s Insurance will likely be required by your lender before closing. Depending on the area your new home is in, it may take some time to acquire special insurance add-ons such as fire, earthquake, or flooding. It is in your best interest to apply for insurance as soon as possible after the contract is signed
Set up new utilities accounts. Contact local utility companies (water/sewer/garbage, electric, internet, cable, telephone) to schedule service to be turned on when you close escrow
Schedule the final walk-through inspection. You’ll want to schedule a final walk-through for the morning of closing so you can make sure the property is in exactly the state the contract says it should be. Take the inclusions & exclusions paperwork with you to confirm that the seller only took what was excluded from the property, and that they did not switch things out (like light fixtures). Also make sure they left the property in the specified condition
You've made it! After signing the mountains of paperwork at closing and picking up the keys and garage door opener, the house is yours! Several days later, the property title change will officially be recorded, and then you’ll be the proud owner of a new home. Congratulations!