Buying or selling a home can take some time from the accepted home offer to closing. The time period that occurs after a seller signs a contract to sell their home and before the home has changed ownership is called the "escrow" period. The term "escrow" refers to the neutral third party that holds on to the buyer's earnest money while the arrangements for the home purchase are made. In Canada, this money maybe held by an attorney or a title company. Home buyers should be aware of the escrow period before they start the purchase process, so they'll know what needs to happen when escrow begins.
When Does Escrow Begin?
Escrow begins when the Discovery Ridge home buyer gives their earnest money to the neutral third party. Sometimes real estate professionals will open an escrow account for the buyer, other times the buyer will give the money directly to the attorney or title company. Escrow ends when the home buyer is given keys to the house and the home is officially sold.
What Happens During the Escrow Period?
Many things happen during the escrow period. Below are just a few examples of what home buyers can expect.
The title search helps the home buyer ensure that the seller has the right to sell the property and that there are no encumbrances on the title. For example, if there is a lien on the property, the title check report will reveal this information.
Home buyers are not required to have homeowners insurance by law. However, many mortgage companies will require the home buyer to hold homeowners insurance for the life of the mortgage. Therefore, many home buyers will spend the escrow period looking for a homeowners insurance company to ensure that they will have the required insurance when escrow closes.
Those who are not required to get homeowners insurance by the mortgage company, or who are planning to pay for their home in cash, may still consider getting homeowners insurance. Home insurance helps protect homeowners from having to make costly repairs in the event that a disaster occurs.
Often home buyers will take time in the escrow period to ensure that the house is in good condition. This is done by getting a home inspection. The home inspector will check parts of the house like the roof, HVAC system, plumbing, electrical system, insulation, structure and more.
If the home buyer chooses not to get an inspection, the buyer could find themselves facing expensive problems shortly after moving in. Home buyers are able to attend the inspection and can ask the inspector questions throughout the process. This is often an educational experience for the buyer, even if the inspection doesn't turn up any serious problems with the home.
Why Must Money Be Held In Escrow?
Money is held in escrow for a variety of reasons. The money for the house is expected to be exchanged upon the conclusion of the home purchase. Keeping the money in an account ensures that the money is there and it is safe. It is held in a third-party account to ensure that neither the seller nor the buyer have direct access to the money as the deal is negotiated.
Once the deal is finished, then the home buyer gets the keys to the house and the money passes out of escrow and into the party or parties that have been designated to be the recipients. For more information about how escrow works, home buyers should contact their real estate professional. Your real estate professional can help you understand the process from start to finish.