Escrow and Inspections
Offer Acceptance and Next Steps
Once your offer is accepted, Escrow will be opened. Escrow is an independent 3 rd party that ensures that buyer funds are protected until the property is property transferred from the seller to the buyer. There also will be an independent Title company that ensures that the seller has the proper ownership and right to transfer the property to you as a buyer.
Within 3 business days of offer acceptance you, as the buyer, will deposit 3% of the purchase price with Escrow (Ernest Money Deposit).
As a buyer, you have several “contingencies” (or outs if you like) that allow you to back out of an accepted offer without penalty and have your 3% deposit returned. The primary buyer contingencies are:
1. Inspection Contingency
You will have time to complete your buyer inspections. Recommended inspectionsinclude (at a minimum):
- General Inspection
- Sewer Inspection
- Termite Inspection
Other inspections may include Pool, Chimney, Roof, Geological, HVAC, Plumbing, Electrical, Mold, etc. (Typically, the General Inspector will recommend these additional inspections if needed). If you are buying a condominium or townhome the inspection also includes a review of the Home Owners Association documents. Susanna can provide you with a list of qualified inspectors for every type of inspections and will also work with you to help you review all the relevant inspections reports.
Buy with Confidence
Should your inspections reveal any deficiencies you have the right to ask the seller to make repairs or to provide you with credit to make the repairs yourself. After inspections and before the expiration of the Inspection Contingency, Susanna will prepare a formal Request for Repairs (RR) where you, the Buyer, formally ask the Seller to repair any significant deficiencies that were identified by the inspectors (e.g., an air conditioner that is not working, or a pipe that leaks, etc.). The Seller can agree – in which case the Buyer removes the inspection contingency and proceeds with escrow. If the Seller does not agree to make the repairs, the Buyer can cancel escrow and receive the 3% deposit back. Typically, it becomes a negotiation between Buyer and Seller on what the Seller will repair or credit.
2. Appraisal Contingency. You will have a professional home appraisal and if the home does not appraise for the agreed purchase price you can cancel escrow without penalty. Your lender will organize the appraisal on your behalf and you, as the Buyer, pay for this appraisal.
3. Loan Contingency. If you are buying the home with a loan you will have submitted a loan “pre-approval” with your offer. However, this was a preliminary approval and you will have time after acceptance (typically 17 days) to obtain full loan approval (this is the time when the lender really digs in to actually get you the loan). If you cannot obtain the loan and you cancel the transaction based on this inability to get a loan within 17 days, you can cancel escrow without penalty.
Additional Escrow Procedures
During escrow there are dozens of forms to both complete and review. During escrow you will also need to determine how you would like to hold title and you will also need to obtain property insurance. Susanna will guide you through every step of the process.
Typically, 2 to 3 days prior to close of escrow the Buyer will sign the loan documents at the escrow offer and the Buyer will wire the closing funds (down payment and closing costs) to escrow.