Escrow: Now What?

Your offer was accepted. Now the work of actually closing the purchase begins.

Here is what to expect and what to stay on top of during the escrow period.

Your deposit goes into escrow immediately.

An escrow or settlement company acts as a neutral third party, holding your deposit and coordinating the activity between you, the seller, and your lender. Before you write that check, confirm you have sufficient funds in your account to cover it. The deposit will be cashed. If the sale closes, it is applied to your purchase price. If the sale falls through, you may be entitled to a full refund minus standard cancellation fees, though in certain situations the seller may be entitled to keep it as liquidated damages. Before you sign the purchase contract, speak with your attorney about whether a liquidated damages clause is in your best interest.

Your down payment affects every month that follows.

You have flexibility in how much you put down, within the terms of your mortgage. The more you put down upfront, the lower your monthly payment and the faster you build equity. It is worth running the numbers before you decide.

The escrow period is typically 30 days.

During that window, every condition specified in the contract must be satisfied. Stay organized and move quickly on each one.

Inspection contingency. Schedule your inspection as soon as the contract is signed. If the results are unsatisfactory, you will want maximum time to negotiate repairs, adjust the price, or cancel without penalty.

Financing contingency. You have a defined window to secure your loan. If your financing falls through and the seller will not grant an extension, you will need to decide whether to remove the contingency and proceed at your own risk or cancel the contract. Do not let this deadline slip.

Clear title. Work with your attorney or title officer to review the title report. The title must be free of liens, disputes, or legal encumbrances before ownership can transfer to you. Verify that all local and state property transfer requirements have been met.

Homeowner's insurance. Your lender will require proof of insurance before the sale can close. In some areas, policies that include fire, flood, or other specialized coverage can take time to obtain. Apply for insurance as soon as the contract is signed.

Utilities. Contact your utility providers early and schedule service to begin on your closing date. It is a small detail that is easy to overlook and inconvenient to fix after the fact.

Final walk-through. Schedule this within 24 hours of closing. Confirm that the property is in the condition the contract specifies, that agreed-upon items are still in place, and that nothing has been removed or swapped out since your last visit. A chandelier you expected to be included has been replaced before. Verify everything before you sign.

Once escrow closes, the home is yours. Everything you just worked through was worth it.