Congratulations on signing a purchase agreement for your new home! While this is a major milestone, it’s not the final step in your homebuying journey. The period between signing and closing—known as “escrow”—is critical to ensuring a smooth transaction. Here’s a breakdown of what to expect during this process.
Entering Escrow
Once you’ve signed the purchase agreement, you enter escrow. This arrangement protects both buyers and sellers by placing payments and property documents in a secure account managed by a neutral third party. The escrow agent will release funds and documents only when all conditions of the agreement are met.
Tip: A REALTOR® can guide you through this process, ensuring all requirements are completed efficiently.
Understanding Escrow Accounts
Buyers typically deposit earnest money into the escrow account to demonstrate their commitment to closing the deal. This sum—either a percentage of the purchase price or a set amount—will be applied toward your down payment or closing costs once the transaction is finalized. The seller’s property documents, including the deed, are also held in escrow during this time.
Pre-Closing To-Do List
Before closing, you’ll need to complete several key tasks:
- Secure a Mortgage
If you’re financing your home, your mortgage loan must be approved before closing. - Home Appraisal
A professional appraiser will evaluate the property to ensure the purchase price aligns with its market value. Some appraisals may include safety verifications, such as ensuring handrails are secure or paint is in good condition. - Title Search
This verifies the seller has legal ownership of the property and ensures there are no issues with the title. - Insurance
Most lenders require homeowners insurance, which protects against unexpected losses or damages. Depending on your situation, you may also need flood, title, or mortgage insurance.
Should You Get a Home Inspection?
While not mandatory, a home inspection is highly recommended and often included as a contingency in the purchase agreement. An inspector will identify potential issues, such as structural problems or environmental hazards like radon or lead paint. Your REALTOR® can help you find a reliable inspector and determine the type of inspection you need.
How Long Does It Take?
The timeline from signing to closing can vary, often taking several weeks. Factors like scheduling inspections, completing lender requirements, and resolving contingencies all influence the timeline.
What to Expect at Closing
Closing is the final step in your homebuying process. Here, you’ll:
- Sign necessary documents.
- Exchange keys.
- Pay your cash to close, which may include fees for inspections, insurance, or loan processing.
Consult the Experts
Since real estate practices vary by state, consult your REALTOR® or an attorney to understand the specific laws and requirements in your area.
For more information and resources, visit facts.realtor.
