Southern California Escrow Process - A Step-by-Step Explanation
THE FIRST STEP IN THE HOME BUYING PROCESS IS FOR YOU TO GET PRE-APPROVED FOR A HOME LOAN.
After finding a property that interests you, I will show you the comps (comparable sales) to help us determine the value of the property. The best comps are in the same building (if a condo/townhome) or in the surrounding area (if an estate, single-family home, or income property). Appraisers are required to focus on the past six months when reviewing area sales, so I try to do the same when analyzing the property's value.
At this point, we are ready to make our offer, which will consist of 4 separate items:
1. The offer contract itself. It is written on a standard California Association of Realtors contract, which I complete and then review with you in person or over the phone. All contracts are signed electronically via DocuSign, which saves a lot of time and paperwork hassles.
3. Verification of funds shows liquid funds for the down payment + closing costs. You can provide copies of bank or investment statements that show the name of the financial institution, your name, and the total balance (you can cross out 1/2 of the account number & your address for security reasons). It's generally best to show more funds than required in order to present yourself as a very financially stable buyer that the sellers will want to be in a transaction with.
4. Buyer's intro/love letter (or video). This explains who you are, what you do, and what you like about the property. I usually write about 95% of this letter for you and then e-mail it to you for final editing.
The offer is presented to the sellers, and we wait for their response. In most situations, they will not sign off on our initial offer but instead write a counteroffer that addresses items in the contract that they would like changed (price is, of course, the item that is countered most often). It may take several counteroffers before the price and terms are agreeable to both parties.
After the offer is accepted, escrow is opened. Escrow is a neutral 3rd party, and their job is to make sure all obligations of the contract are fulfilled before the seller gets their money and the buyer gets keys to the property. The most standard escrow length is 30 days (but some escrows are as short as 14-21 days).
I will send a copy of the completed contract to the lender, and you will need to promptly provide them with any additional information and/or paperwork they require. The lender takes care of scheduling the appraisal.
You will schedule the physical inspection with an inspector of your choice. I can give you a list of inspectors my clients have been very happy with. The physical inspector checks all the major systems in the property (plumbing, electrical, heating, etc) and looks for cosmetic damage and problems (sloping floors, doors that stick, cracks in walls/ceilings, etc). For a condo/townhome inspection, the inspector only inspects the unit and not the common areas (building, hallways, pool, etc) but if you are purchasing a home, the inspection will also check out the exterior (roof, foundation, garage, etc.). I recommend that my clients always get a mold inspection done, and if the property has a fireplace, then you should also have that inspected. Whenever purchasing a single-family home, it is very important to have a sewer inspection. A termite inspection is also recommended for all properties. Geotechnical inspections are important if you are buying a home in a hillside area or if the ground slopes from the front to the rear of the home. You can also schedule additional specialty inspections if you would like. After reviewing all inspection reports, we will complete a Request for Repairs form (asking for a credit and/or repairs), depending on what is listed in your inspection reports. The seller generally pays for a retrofitting inspection which will make sure the property is up to code with smoke detectors & carbon monoxide detectors, water heater strapping, the gas shut-off valve, and possibly more (retrofitting requirements vary by city).
You will need to call an insurance company to verify that the property is insurable and get quotes for the cost of insuring the property. For a condo/townhome, you are generally just insuring your personal contents & improvements (the building is almost always insured by the Homeowners Association).
If the property you are purchasing is a condo/townhome, you will receive copies of all the homeowner's documents to review. You generally have 5 calendar days to review this paperwork which includes: copies of the meeting minutes for the past year, budget and financial information (including the amount currently in the HOA reserves), and a copy of the CC&R's (Covenants, Conditions & Restrictions).
Loan and escrow closing documents are usually signed as early as a week before closing.
Five days or less prior to closing, we do a walk-thru of the property. This gives us a chance to verify that any seller repairs were completed, and we also make sure the property is in the same condition as it was when we initially wrote our offer.
Two business days before closing, you wire the remainder of your down payment plus funds for closing costs to escrow. The loan proceeds are also wired to escrow one or two business days prior to closing.
On closing day, we wait to hear from the title company that you are listed on the county records as the new owner, and then you get keys to your new home.