Repeat buyers and first timers often need to be refreshed about 3 of the process's involved in a real estate transaction which are escrow, inspections, and appraisal. State law will vary but in the West, you can anticipate the following:
What is escrow? Escrow is the process that starts when your purchase offer is accepted by the sller and it ends when you become the new registered owner of the property. Some escrow companies are independent firms and some are within the framework of a title company. Fees & service vary between companies and some offer discounts under different menus. Ask and compare.
Title Company and Escrow Holder You will need to select a title company and escrow holder, which serves as a neutral third party holding all the instruments - deed, deed of trust, reconveyance, etc; and all the money. The title company will research the complete recorded history of the property, to insure that the title is free and clear of encumbrances by the date of closing and that all new encumbrances (your new Deed of Trust which secures the note to the financial institution) are properly added to the title. Some properties are subject to restrictions which limit various activities from building to parking. There may be recorded easements and encroachments, where others have limited rights to use your property. It is vitally important that you receive the preliminary report of title, read and understand it! Many transactions are contingent upon approval of the title report which means that you get X number of days to read and approve, in writing. If the information is not crystal to you, call the title company and ask for an explanation. If there are several easements, request a map with the easements plotted in color.
How to Hold Title You may wish to consult with an attorney or tax advisor on the best way to hold title. Different methods of holding title have different legal, estate and tax implications, especially when selling or upon death of the title holder. A couple of examples of how folks hold title are "husband and wife as joint tenants" or "husband and wife as community property".
Inspections Once your offer is accepted by the seller, you'll need to have professional inspectors evaluate your home's major systems. Your real estate agent may recommend other inspections, such as roof, HVAC (heat/air conditioning) systems, chimney/fireplace, property boundary survey, well, septic, pool/spa, arborist or mold. Ask your agent for a list of inspectors and take the time to call and chat. You will probably find a swing in pricing, the way a report is created and delivered, and in guarantees. At the very least, consider a Home Inspection and Pest (termite) Report.
Appraisal and Lending Keep in close communication with your lender, who will let you know when additional documents are needed to approve your loan application (if that's not already finished) and fund your loan. The lender will often send an appraiser out to the property and you may pay a fee for this service. Appraisers are specialists in determining the value of proerties based on a combination of square footage, building costs and recent sales of comparable properties. Comparable sales drive most markets as they establish a bench mark about what someone else thought was a reasonable price. Appraisers typically look for comparable sales within the past six month window. In rapidly changing markets, they seek the most current comps possible. The written report represents one person's report on value for that particular time frame.
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