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Have you ever heard someone say their house was in Escrow and have the sudden desire to offer your sympathy? The word Escrow sounds scary because it’s unfamiliar to most people. When you’re selling your home, Escrow is a positive step towards moving forward and closing the deal. With that in mind, you may be wondering what does Escrow mean for the home seller?
Let’s take a trip back to childhood to explore the basics of Escrow. Billy has a shiny, red car that’s been his favorite since Christmas, but his friend Mark just got this really cool water gun. Mark is pretty interested in having Billy’s favorite car, so he suggests a trade. If this sounds like a familiar story from your childhood, you know what happens next. Billy isn’t going to just hand over his car without some security in knowing that Mark is going to hand the water gun back in return. When you’re a kid, this usually results in a slow exchange with a quick grab at the end by both parties.
Unfortunately, you can’t do this with your house. Billy and Mark would have benefited from having an Escrow Officer to oversee the trade of their beloved treasures. That’s exactly what an Escrow is for a home seller and buyer. The Escrow Officer is a neutral party who ensures that the money coming from the buyer and the paperwork coming from the seller are kept safe and in order until the day of the closing.
The Who, What, Where, and How
While the seller’s agent may suggest options for an Escrow Officer, the buyer gets to choose. This is negotiable, however, dependent upon any federal laws. The seller’s agent will deliver the contract and the Earnest Money deposit (from the buyer) to the Escrow Officer, where an Escrow will be opened on behalf of the clients.
The fee for securing the Escrow Officer is usually split between the buyer and the seller. This is not so in the case of loans like those offered by the VA. In those cases, fees are paid by the seller.
The Escrow Officer holds the funding secure from the buyer and begins to research the title from the seller. They are in place to make sure the entire transaction is handled securely and fairly for all parties involved.
The buyer has a Due Diligence period during Escrow when they can hire an inspector to look at the house and property. This period of time is usually 10 days. During this time, they have a chance to reject the property and get a refund of their Earnest Money. Be prepared to deal with anything that comes up during the inspection that may try to slow down the sale of your house.
The Escrow Officer will return with a title summary that will list any problems they’ve found with the title of your house. It’s best to tackle any issues before you put your house up for sale, but there may be cases when surprises crop up that you were not aware of previously. Be ready to handle these issues quickly or it could result in the buyer backing out of the deal. Unforeseen incidents can include back child support liens, student loan liens, unpaid contractor disputes, back taxes, and past mortgage problems.
The bank or lender will order a home appraisal during this time. The appraisal service is selected by the lender and provides the lender with a report on the value of the house. The appraisal must be paid for, in advance, by the buyer. If the appraisal comes back with a number you don’t agree with, you may be able to dispute the findings. This is where having a qualified real estate professional on your side is going to come in handy!
The Escrow period lasts anywhere from 2-weeks to 45-days (or more), depending on the details of the sale and the how quickly each step is completed. Some cases take longer due to lender guidelines, but you should get a good idea from your real estate agent as to what you can expect.
The Between Time
There’s really nothing labor or action intensive you, as a seller, need to do during the Escrow period other than be ready and have your house ready. Keep your home clean and in good repair. This includes appliances and things like smoke detectors.
Keep your phone nearby and be ready to spring into action if you are called upon to put out a fire in the title, appraisal, or inspection areas.
Be flexible with your calendar and make your home available to the professionals and agents who need entrance to get things accomplished. Remember, the faster they do their jobs and produce the results, the quicker you can move into the closing phase and move on with your life.
Going through the Escrow process can be exciting and stressful. Having a dedicated and experienced real estate agent working on your side can help you get through it all as quickly as possible.