What Happens in Escrow When Buying a Home
Buying a home is an exciting time, but the steps you need to take to finalize your transaction can sometimes be confusing or even frustrating. The safe and efficient transfer of real estate involves a number of steps. Title searches are performed, inspections and appraisals normally take place, a variety of documents are prepared and signed, and the actual transfer of funds is organized and completed. In addition, issues that might arise during the process are addressed and resolved. This activity then leads to the closing.
The first step in determining which home you will buy is to find a REALTOR and lender to help you estimate what you can afford and ensure you have the cash for a down payment and closing costs. Once you determine your budget, find your dream house and have your offer accepted by the seller, the countdown to the closing begins. Timing is crucial in a home closing. You can shop around to select a settlement agent to handle all of the closing details, or you can ask your real estate professionals for a recommendation. Once you’ve selected a title company and escrow officer, he or she will direct the closing process.
Now, all of the behind-the-scenes work starts. A title professional will search and examine the public records for information related to the title of your prospective home. This search provides information about liens or debts of the current owner and can identify warnings of title flaws that should be resolved before the property can change hands.
After resolving any title “clouds,” the escrow officer is ready to prepare the closing documents, which outline the fees associated with the closing for both the buyer and seller.
By the time you are ready for your closing day, all of the behind-the-scenes work has been completed. Your escrow officer will help explain the content of many of the documents you will then sign. Once the signing is completed and the proper documents are recorded, the house is legally yours!
After closing, while you’re unpacking boxes, the escrow officer sends the funds to pay off the seller’s lender, gives the seller their proceeds check, and disburses checks to all of the parties who provided services in connection with your closing.
Generally, you don’t have to be involved in any of this because your escrow officer coordinates everything.
In our next installment, we will cover how title insurance protects your investment, or, in other words, your new home.