Congratulations! You're In Escrow...
There are a lot of "vocab words" or "industry jargon" in real estate that can make it very confusing for the Average-Joe-Homeowner to know what is being discussed.
"Escrow" is one of those words.
I HATE having my clients be confused.
I want you to understand everything that is going on, so you feel a PART of the process and are able to make your own good decisions, all along the way.
So, let's pull off the band-aid.
What does this confusing word mean?
"Escrow" is the name for the process that takes place after you have a contract to purchase a house (buyer and seller have signed a Purchase and Sale Agreement), but before the "closing" (When money and keys change hands.)
The "Escrow Company" is usually a law firm that acts as a neutral third party to hold & disburse funds, make sure all the contract paperwork is in place, and get the deed recorded at the courthouse.
Once you have a signed and accepted purchase agreement written on the property you're buying and selling, you'll "be in escrow."
Here's what happens next.
1) Buyer will be asked for an Earnest Money Deposit which will go toward the down payment on the home they are purchasing. Earnest money is usually between 1% - 5% of the price of the home, depending on how competitive the market is at the time. This deposit usually needs to be wired to the escrow company within 2-3 business days of going under contract.
2) Buyer needs to decide how much of a Down Payment they want to make on the house. This represents the total cash you will need to complete the purchase. Some people think you have to put 20% down, but not anymore. Many people buy homes with 3%, 5%, 10% down payments - and I have had clients go the no-money-down route, too. Talk to your mortgage broker to see what kind of down payment makes the most sense to you. You can choose to put down as much or as little as you want (depending on your mortgage), but remember, the more you put down toward the total price of your home, the lower your mortgage payments will be every month.
3) During this period of purchasing your home, you are going to need an Escrow or Settlement Company to act as an independent third party so that you know when and who to give your money to get the deed to your new home. This is something that the buyers and sellers can choose, but most real estate agents have a couple of go-to companies they work with often and can recommend to you.
How Long Does It Take To "Be In Escrow" Before Completing The Transaction?
You've made it! Once the sale has closed, you're the proud owner of a new home.
Congratulations and Welcome To The Winner's Circle!