10 Steps to Successfully Close Escrow
Wondering how escrow works and what's involved? You're in the right place! This post will explain what you can expect throughout each of the stages of escrow. The escrow process begins just after you accept an offer and ends when the buyer receives possession of the home. Let's take a look!
Opening Escrow & Title:Once you select an escrow company, opening escrow is relatively fast and easy. To open escrow you simply send the purchase agreement to the escrow officer via email, fax, mail or in-person delivery. Be sure to include the following:
-- Property address
-- Purchase price
-- Escrow period (typically 30-45 days)
-- Name of all sellers and their contact information
-- Name of all buyers and their contact information
-- Name and contact information of any agents involved
-- Commission that will be paid to any agents
This will help clarify the details for the escrow officer and get the process started smoothly.
Prepare Disclosures:You have to complete a list of legally required disclosure forms that will be provided to your buyer for their review. If you wisely completed your Seller's Disclosure packet when you listed your home rather than waiting until you opened escrow, then this step is done in advance. Disclosure forms and rushed timelines can be intimidating for sellers, so many sellers hire a Transaction Coordinator to help them manage the process. Learn more about what forms are required.
Pest Inspection:Pest inspections and clearance certificates are often required to close escrow in areas affected by termites. Sellers are usually required to provide the pest inspection report to the buyer within 7 days of accepting an offer. We recommend doing this prior to listing the home for sale so there aren't any surprises during escrow. Doing so will also give you an opportunity to repair any damage caused by termites ahead of time and not delay the close of escrow.
Escrow Package:Your escrow officer will mail you a package, typically within a week of opening escrow, with several documents for you to complete and sign.You'll need to review each document carefully and ensure the escrow instructions exactly match the terms of the purchase agreement. Your Transaction Coordinator should do the same to catch any items you miss.
Buyer's Inspections:Depending on where you live, your buyer will typically be given 5 to 17 days from the time you accept their offer to conduct their inspections. The buyer can change the number of days on the offer, so be sure to read your contract to confirm the timeline. These inspections can include a walk-through inspection by a third party home inspector, HVAC, Electrical and plumbing, pool and spa, roof and an appraisal.
We recommend you have a general property inspection done before opening escrow, and ideally, before you begin to receive offers on your home. Completing this inspection ahead of time can help you to shrink or eliminate your buyer's allowable cancellation period and make it difficult for a buyer to ask for repairs after you enter escrow.
Buyer's Request for Repairs:The buyer has the right to request repairs within their inspection period. However, you should know that you are not obligated to make any or all of these repairs. Again, it is good practice to complete any repairs that you anticipate a buyer would request ahead of listing the home for sale. This gives your buyer fewer reasons to back out during escrow and will make your home more appealing during the marketing process.
Contingency Removal:There are several contingencies in a purchase agreement that give the buyer a way to back out of escrow without penalty. As such, it is critical that you ensure the buyer remove their contingencies the moment their contingency period expires.
Here's a list of standard contingencies and their associated timeframes:
-- Loan (21 Days)
-- Appraisal (17 Days)
-- Buyer's investigation, including insurability (17 Days)
-- Condo Disclosures and CC&Rs (17 Days)
-- Reports/Disclosures including seller disclosures, a physical inspection report and pest report (17 Days)
-- Title report (17 Days)
-- Sale of Buyer's Property (Varies)
These contingencies must be actively removed, which means they do not simply expire at the end of the contingency period. A contingency removal form must be completed and signed by all buyers before they are removed. If you hired a Transaction Coordinator, you can be sure they will be all over the buyer's contingency removal and it will not be forgotten.
Buyer's Final Walk-Through:The buyer typically has the right to do a final walk-through of the property within five days before the close of escrow. This allows the buyer to confirm that the property is in substantially the same condition as it was at the beginning of escrow and that all agreed upon repairs have been made.
Close Escrow:You made it to the finish line! The above steps have been completed, the buyer's loan (if applicable) has funded and you have received confirmation that the grant deed has been recorded. Next, you will receive a final settlement statement from escrow that breaks down your selling costs - usually within a day of closing. These costs are deducted from the purchase price, and you'll find your net proceeds at the bottom of the page.
You can have escrow wire your sale proceeds directly to your bank account (usually for a small fee) or you can have them cut you a check. The check can be mailed or picked up in person.
Possession:The purchase contract will explicitly state the date and time which the buyer receives possession of the property. Normally possession occurs the same day as close of escrow. However, you may agree to give possession before or after close of escrow if you or the buyer need a few extra days to get things in order.
If you want to stay in the home past the close of escrow, be sure to sign an agreement with the buyer that outlines the terms of possession, such as the number of days you will stay and the per diem rent you will pay. Similarly, if you decide to leave early and the buyer would like to move in before closing, have an interim lease agreement drawn up for your protection. This is the tenth step to succesfully close escrow!
You're Done!Congratulations! The escrow process is probably the most daunting part of selling your home. Want some help navigating this process? See what Home Bay has to offer.
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