The seller has accepted your offer. In the words of Springfield resident Homer Simpson: “Woo-hoo!!”
You are now under contract and on your way to getting that new Seattle dream home. Celebrate a little … but we still have some work to do.
What’s next? I’m glad you asked.
Let’s get one of the most important responsibilities of the buyer out of the way here first. If you didn’t attach the earnest money check to the offer, then you have two business days following seller’s acceptance (also known as mutual acceptance) to deliver the money to the seller’s broker through your agent (that’s three people handling the check within two days). Your agent then works with the seller’s broker to ensure escrow has the check within three days of delivery from you. Refer to your purchase and sale agreement or your agent for exact timelines.
So, who and what is escrow?
Escrow agents are state-licensed, neutral third parties that handle and coordinate title and escrow work, financing, transaction instructions, paying off existing mortgages, prorating property taxes and other paperwork related to the home purchase. They collect relevant documents and funds in “trust” for all parties until the transaction is complete.
Title company professionals research public records to identify any complications with the home’s title, which is the official home-ownership documentation recorded with King County. They ensure a title is satisfactorily clear of liens (usually unpaid bills on the home, often related to taxes), legal judgments against the homeowner (seller) and other encumbrances (a fancy word for a “right of interest” to the property). Title companies sell one-time insurance policies as part of your closing costs. You are only obligated to purchase a lender’s policy if you are getting a mortgage – but it’s smart to include the new owner’s title policy as well.
Where homeowner’s insurance protects you from future damage or loss to the property, a homeowner’s title insurance policy covers you from potential loss associated with past defects in the title as well as, in some cases, future claims. This puts the onus on the title company to verify the accuracy of home ownership and whether any government, business or individual has placed a “hold” against the current owners/sellers for failing to pay their bills. Before closing, the seller is responsible for working with the title company and claimants to resolve issues – an area that could delay closing.
Should any title-related issue be discovered after closing – such as clerical errors, undisclosed heirs to the property, impersonation of the owner or misrepresentation of a will – the title company will handle the matter and cover losses and damages you may suffer for as long as you own the home.
Title companies often work within the same organization as escrow to help make the process more seamless. Escrow typically provides the title rep with basic information – legal description of the property, sales price, marital status in the event there are two buyers – to start the title work.
The legal description is part of something called a Schedule A title report. A Schedule B relates to certain items linked to the property, such as CC&Rs and HOA bylaws, zoning conditions, special assessments or other exemptions; you’ll want to review Schedule B, usually within 10 days of mutual acceptance, and if you disapprove of any aspect you must give notice, usually within five days of receipt, and consider backing out of the deal. (You will be asked to sign a document at closing that states you agree to follow the requirements in Schedule B.)
As you might have guessed, you will be working closely with your designated escrow representative. He/she will provide instructions – usually in person – and exchange phone and email communications during the next few weeks. For example, escrow will want to know full details about your lender (assuming you’re not paying in cash), and it will work with your real estate broker to ensure each contingency clause is satisfied by closing. (Tip: If you wish to use a Power of Attorney at signing, arrangements must be made 1-2 weeks in advance with the escrow agent.)
Escrow and your mortgage lender will stay in touch with each other – exchanging inspection reports, title information, homeowner’s insurance policy details – to hit your target closing date. The date could shift and your broker will work with you if an extension is necessary. (Reminder: It’s better to avoid closing on a Friday or days before a holiday.)
Meantime, your lender is working in the background to schedule the appraisal – to ensure the home’s value is at least that of the agreed sales price – and then complete your loan application. Being fully underwritten before making your offer will come in handy, usually shortening the number of days to closing.
While real estate brokers will likely provide an estimate early on, only your escrow agent will provide the exact amount of money you will need to bring to closing to cover the down payment and any other funds necessary to complete the loan. There are several costs associated with the home-buying process (excluding the actual price of the home), with many of the fees usually the seller’s responsibility.
Escrow will usually contact you about making an appointment to complete the closing. They will offer more details about what you need to bring and what else to expect during the meeting but we’re still several steps away from that.
While title, escrow, mortgage and real estate reps work on your behalf, you can take a walk. Not just any walk. Most home-purchase agreements include a contingency that grants buyers three business days from mutual acceptance to tour the neighborhood and, if buyers wish, give notice of disapproval and terminate the agreement. Buyers can cite safety, traffic or environmental issues, or they can point to the quality of schools, public transportation concerns or noisy conditions as reasons to back out of the deal. We always recommend walking the area before submitting a formal offer.
The first few days after mutual acceptance is a whirlwind. Next up: Scheduling and attending the home inspection.