Whether supplied by the buyer or seller, an escrow company represents both parties equally and provides each with protection and convenience throughout the sales transaction. This impartial third party holds all legal documents and funds on behalf of both parties, and makes sure the final sale is satisfactory to everyone involved.
Opening escrow is as easy as making a deposit and providing instructions for the transaction. This can be done by the buyer, seller, buyer’s agent or lender, but is customarily handled by the seller when there is no agent involved. The deposit and instructions typically consist of the down payment from the buyer as well as the signed sales agreement.
Buyer Inspections & Appraisal
As dictated in most real estate sales agreements, the buyer has a right to inspect the property thoroughly. Inspections are typically conducted by licensed professionals who take their job seriously. In this case, their job is to find anything wrong with your home and point it out to the buyer. The inspector will check the condition of your roof and look for evidence of termites. In some states, a home is required to be free of termites before a sale can close. As part of this inspection, you will also be required to make any major repairs needed to appliances and electrical, heating, septic and plumbing systems. If repairs such as these are required, and you fail to make them, the buyer has the right to back out of the agreement.
Aside from the inspection, another major consideration prior to closing is the buyer’s appraisal. Specifically, this is an appraisal ordered by the buyer’s lender to make sure that the property isn’t worth less than the loan amount. As part of this process, the lender will also check the title on your home to make sure it is free of any liens.
While the inspection and appraisal are the responsibility of the buyer and the buyer’s lender, they are important to note because either could potentially result in the cancellation of the sale.
Once inspections and appraisals are completed, the buyer’s lender will issue a commitment document outlining what must be done by the buyer to complete the sale. At this point, you should take the time to notify your own mortgage company that you will be selling your home and paying off your mortgage.
NOTE: Make sure you understand the terms of your escrow, as they may differ depending on locality or timing.
Closings typically occur 30-45 days following the signing of the sales agreement by both parties. At closing, funds are collected, loans are paid, the ownership is transferred to the buyer and insurance of a clear title is issued. The seller receives the sales proceeds within two business days of the closing, which is conducted by either a title company or an attorney depending on the state in which the sale takes place. On the actual closing day, the buyer will do a final walk-through of the home to assess its condition and check that all agreed repairs have been made.
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