Escrow: Now What?
Congratulations, you are on your way to owning your very own home! These suggestions will help Escrow and Settlement go as smooth as possible.
You will be asked for a down payment on the home you are purchasing. In our market, many vacation focused properties will require a 30% or higher down payment. Some, such as Fractional Interest homes, cannot be financed.
During this period of purchasing your home, we are going to need a Title company to act as an independent third party so that you know when and who to give your money to get the deed to your new home. In Utah, Title fees are set by the State, so all Title companies have the same fees. The Title company will coordinate much of the activity that goes on during the escrow period. However, your Deposit is normally held at your Realtors Brokerage. This money will have to be wired within four days of going under contract, so make sure that there are sufficient liquid funds in an account to cover this wire.
The deposit will be applied to the purchase price of the home. If for any reason the sale is not consummated, you may be entitled to receive all of your deposit back, provide cancellation has been in accordance with the contract. In certain instances, if Deadlines have passed, the seller may be able to retain this money as liquidated damages. Prior to executing a purchase contract, it would be wise to speak with your Realtor to understand the contract.
The period that you are "in escrow" is often 40 days, but may be longer or shorter. During this time, each item specified in the contract must be completed satisfactorily. By the time you have gone under contract, you have come to an agreement with the seller on the closing date and the contingencies. Each contract is different, but most include the following:
1. Due Diligence contingency: During this period, the Buyer can back out for any reason and their Deposit is fully protected. The Buyer will be provided disclosures by the Seller, and will have an opportunity to fully consider them, as well as have a Home Inspection carried out.
2. Financing contingency: Once the contract is signed, you have a 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. You may choose to cancel the purchase contract. In this situation, your Deposit is fully protected.
3. A requirement that the seller must provide marketable title. The Seller’s Title company will provide a Title Report, which we can help explain to you. In extreme cases, we may need an Attorney to examine the Report on your behalf. The title must be "clear" to ensure that you do not have legal issues regarding your ownership.
4. Secure homeowner's insurance. Increasingly, you should reach out to ensure the insurability of a home immediately after going under contract. This is wise because some regions and some properties are becoming difficult to insure. Further, due to requirements such as special fire and earthquake insurance, obtaining this insurance may require a lengthy period of time. It would be in your best interest to apply for insurance as soon as possible after the contract is signed.
5. Contact local utility companies to schedule to have service turned on when you close escrow. We normally do this a week or so before Settlement. Some utilities are automatically transferred on your behalf by the Title company at Settlement, such as water.
6. Schedule the final walk-through inspection. We normally plan to do this on your behalf if you are not going to be in town for Settlement. At this time, we make sure that the property is exactly as the contract says it should be. What you thought to be a "permanently attached" light fixture that would come with the property might have been removed by the seller and replaced with a different fixture entirely. The Rule of Thumb is that if it takes a screwdriver to remove it, it needs to stay…
You've made it! Once the sale has closed, you're the proud owner of a new home. Congratulations!