Understanding the Escrow Period When Buying a House
Maybe you've seen one of the movies highlighting the nightmares of the escrow period and you're worried about it. While it can be a bit stressful, it's nothing like what you may see in a comedy movie. Here's a quick guide to help ease your mind about the escrow period you'll go through when buying a house.
What is the Escrow Period?
After the home selling contract has been signed, you'll enter into the escrow period. This period is about 30 to 60 days long and provides time for several things to happen. Before entering the escrow period, the buyer will provide a deposit on the house, which will be held by a third party, usually an escrow company or the title company.
What Happens During the Escrow Period?
The escrow period can be a very busy time for both the buyer and the seller. Usually, the seller will be working on packing their things and preparing the property for the new owner. The buyer will be working on plenty of things, as well, including:
• Getting an appraisal - Usually, an appraisal will be required by the lender and will be done during the escrow period.
• Getting a home inspection - A certified home inspector will be hired to determine if there are any maintenance challenges a buyer will face with the property.
• Get homeowners insurance - Another requirement of the lender, the buyer will need to get home insurance during the escrow period.
• Negotiate repairs - After the home inspection has come back, the buyer will have the opportunity to negotiate to have repairs done or for a lower price to cover the cost of repairs. This usually happens if a major issue has been uncovered and is less likely with very minor repairs.
Make arrangements to move in - The buyer will also use this time to pack up their belongings, hire a moving company, and get ready to move in.
Contingencies to Handle During the Escrow Period
When a buyer and seller enter into the escrow period, the contract will spell out many contingencies that must be handled during this time. These contingencies often include:
• An Appraisal Contingency - If the property doesn't appraise for at least the amount the buyer has agreed to pay the seller, they may be able to walk away from the deal.
• Home Inspection Contingency - If the home inspection report shows a major repair it may allow the buyer to walk away. However, it's more common the buyer and seller will negotiate a lower price or the seller may pay for the repair.
• Financing Contingency - If the buyer cannot get financing, it may cause the deal to fall apart. Often, the escrow period allows the buyer to go from pre-approved by a lender to approve through the appraisal, home inspection, getting home insurance, and other things that must be dealt with. As long as the loan is funded, the financing contingency will be lifted.
Let Your Real Estate Agent Be Your Guide
Going through the process of buying a home can be stressful. With the right real estate agent on your side, you'll have a knowledgeable guide to help ensure you understand what's going on and why. Let your agent be your guide during the escrow period and you won't have anything to worry about.