What It Means To Be In Escrow

The time period between the acceptance of your offer and the day you pick up the keys to your new home is an important and busy time. In some cases, this time period is called being in escrow. Others may refer to it as a time of due diligence. The tasks and importance are the same, though, regardless of what you call it. With the closing only a few weeks away, you will be very busy trying to accomplish the below tasks. Read on and find out more.

1. Get Your Home Covered – Your lender requires that your new place be covered under a homeowners' insurance policy that is appropriate for the value of the home as well as its location. Certain homes in hurricane-prone locations must have hurricane policies in addition to the regular hazard policy. In some cases, homes hundreds of miles inland must have this coverage. Also, homes located in certain flood zones should have flood insurance. Though it may not be a requirement, check out the flood potential for your home before you opt out of the coverage. Most insurers offer several levels of coverage that can replace your current structure based on its appraised value or that can rebuild the structure based on whatever the current building materials cost.

2. Have Your Home Inspected – Even new homes can have problems that need to be addressed before you close. Be sure to schedule your inspection quickly since good inspectors may be very busy. If an expensive-to-fix problem turns up as a result of the inspection, you have several options:

  • You can cancel the contract and get your deposit back.
  • You can ask the seller to reduce the selling price of the home because of the problem.
  • You can ask the seller to repair the issue prior to the closing. If you do this, plan to reinspect the property before you close on the home.
  • You can accept the home the way it is and make the repairs yourself on your own dime.

3. Get a Clear Title – Homes are not always sold by the rightful parties. Conducting a title search allows you to be sure you are buying the home from the right seller. Then, you can buy title insurance that will cover the cost of litigation should anyone come forward claiming to own the home in the future.

4. Get Your Lending Lined Up – This part of escrow is why closings can take longer. Be sure you are quick in filling out your application and in providing anything else the lender requests in the way of proof of income and more.

What does the above have to do with escrow? In many cases, the closing itself is hosted by the title company, who also may hold the escrow account that deals with the home's financial arrangements prior to closing. To learn more, speak to your real estate agent.

Contact a real estate agent if you have other questions about homes for sale.