**You enter escrow once you have signed a purchase agreement with the seller of a property.**
Entering escrow is an important step in the home buying process. It essentially means that you have entered into a contract with the seller and are ready to move forward with the purchase. During escrow, a neutral third party, typically a title company or escrow agent, will hold onto funds and documents related to the transaction until all conditions of the contract have been met.
FAQs about entering escrow:
1. What is escrow?
Escrow refers to a financial arrangement where a third party holds onto funds and documents on behalf of two parties involved in a transaction, such as a home purchase.
2. How long does escrow typically last?
Escrow periods can vary, but they typically last anywhere from 30 to 60 days, depending on the terms of the purchase agreement and any contingencies that need to be met.
3. What happens during escrow?
During escrow, the buyer will generally conduct inspections, secure financing, and ensure that the property’s title is clear of any liens or other issues.
4. Who chooses the escrow company?
Typically, the buyer’s real estate agent or the buyer themselves will choose the escrow company. However, it is not uncommon for the seller to also have some input into this decision.
5. Do I have to pay for escrow?
Yes, both the buyer and seller are responsible for paying their share of the escrow fees. These fees are usually based on a percentage of the purchase price of the property.
6. Can the escrow process be canceled?
Yes, the escrow process can be canceled if either party fails to meet the conditions set forth in the purchase agreement. This could include issues with financing, inspections, or other contingencies.
7. What documents are typically held in escrow?
Documents held in escrow can include the purchase agreement, title documents, loan documents, and any other legal paperwork related to the transaction.
8. Can repairs be made during escrow?
Yes, typically repairs can be made during escrow, especially if they were outlined as a condition of the purchase agreement. However, it is important to ensure that all repairs are completed to the satisfaction of both parties before closing.
9. What happens if the property appraises for less than the purchase price during escrow?
If the property appraises for less than the purchase price, the buyer may have the option to renegotiate with the seller or withdraw from the transaction. In some cases, the lender may not approve a loan for more than the appraised value.
10. When does closing occur in relation to escrow?
Closing typically occurs after all conditions of the purchase agreement have been met and the lender has provided final approval for the loan. Once closing occurs, ownership of the property is transferred from the seller to the buyer.
11. What happens to the earnest money deposit during escrow?
The earnest money deposit is held in escrow until closing, at which point it is typically applied towards the buyer’s down payment or closing costs. If the transaction falls through, the earnest money may be returned to the buyer or seller, depending on the circumstances.
12. Can I back out of a purchase agreement during escrow?
While it is possible to back out of a purchase agreement during escrow, doing so may result in the loss of the earnest money deposit or other legal consequences. It is important to carefully review the terms of the agreement and consult with a real estate professional before making this decision.