Before we can discuss what to expect during the escrow process, it is important that we define the term “escrow” well, an escrow refers to the method whereby a real estate transaction is closed. Here, an escrow agent will be involved in this process and his work is to oversee, the whole closing process of a real estate transaction. This will definitely involve the payment of monies involved in the real estate business.
The escrow agent
The escrow agent could be an attorney, an escrow company or even a trust company that is charged with the responsibility closing a real estate deal. The escrow agent could also be a department of an institution that lends money for the real estate purpose. Many States and Counties have laws that regulate the escrow agents and limit how they serve in this capacity. Whether you want to buy a home in Passaic County, Bergen County or Essex County; you need to be aware of these agents and the regulations governing their operation.
The Escrow Procedure
Buying a house involves a lot of complications and this means that most people do not understand the escrow process. This is also known as the “closing”, and this occurs during the period the seller accepts the agreement of purchase and the time when the buyer receives the keys to the new home or house. To ensure that you are confused by the whole process, here is a guide of what procedures to expect during escrow:
- The first thing you should do is open an escrow account. After you have signed a purchase agreement with your seller, your escrow agent will then collect the earnest money in the form of a check and deposit this into an escrow account. The escrow agent will act as the third party for the purpose of collecting the required documents and funds for the closure.
- Await the appraisal of the bank about the property that you are buying. This appraisal helps the bank to protect it and its financial interests in the case the bank wants to foreclose on the home or house. In case the appraisal comes in lower than the price that is offered by the buyer, you should be ready to come up with the difference or have your seller lower the price.
- The next step is to secure financing for the mortgage. This should have been done by the time the purchase agreement with the seller accepted.
- You will then need to approve the disclosures of the seller. Any obvious problems with your seller or the seller’s agent in Orange city or other cities such as West New York should be notified to you at this point.
- The next procedure is for you to obtain necessary inspections of the home or property. This is not a must but a necessary step to inform you of the state of the property that you are buying.
- You should then get the hazard insurance. You need this kind of insurance is suitable for your specific geographic area as it will shield you from hazards such as floods and other unforeseen calamities that could befall you. You may also be required to have what is known as the homeowners insurance up to the point when your mortgage is fully paid.
- The next step is the title insurance and the title report. Your lender will require this, though it is important for you to have it as well. This ensures that there are no liens on the property that you are buying.
- The remaining thing is for you to do the final walk through of the property where you will inspect it afresh to ensure that there are no new damages to the property. You do not want these kinds of damages anyway. You will then review the HUD-1 form and close the escrow. The HUD-1 form is the final statement of the closing costs and the terms of the loan.