Escrow, Inspections, Appraisals, and Loan Approval
If we’ve reached this stage of the home buying process, it means the seller has accepted your offer. Congratulations! Now, we can focus on the next steps: escrow, inspections, appraisal and loan approval.
Escrow: (Also known as being “in contract”), escrow in the simplest terms, is an account held by a neutral, trusted third party to carry out the agreed instructions of the contract. The seller usually chooses the escrow company in advance. The escrow officer works with both parties to perform as promised, and the escrow account holds the funds (like the initial deposit, down payments, lender funds, etc.). When all the funds are in place, and all the instructions are complete, the title officer will transfer the ownership by recording the buyer’s names on the title and then “fund and close escrow.”
Inspections: The buyers are entitled to any and all inspections to get a good understanding of what they are buying. In a more balanced real estate market, inspections generally occur after offer acceptance. The results of these inspections can lead to a request for the seller to do repair work or a request for a credit back to the buyers. In a seller’s market, the seller generally has the customary inspections completed before listing the property for sale. Buyers are asked to review the inspection reports with the hope an offer is written “as-is” with no additional inspections requested.
Appraisal: If financing is involved, the lender will want to be sure the property value is more than the loan being considered, so they will order an appraiser to visit the property and determine its fair market value. The appraisal report is used in conjunction with the buyer’s total credit picture to approve the loan.
Loan Approval: Once the lender receives and approves the appraisal report, and the buyers receive any final item requests, the lender then provides loan approval and the buyers can remove the appraisal and loan approval contingencies.