Step 9 to Buying a Home: Open Escrow and Deliver Your Deposit
Now that your offer has been accepted by the seller it’s time to open escrow.
If you’ve purchased property in other places you might be scratching your head. What is an escrow?
Unlike other areas, we don’t have closing Attorneys and we don’t have round table closings. Instead we use a third party known as an escrow, and more particularly you will have an escrow officer responsible for your file. When we wrote our offer back in step 7, we almost certainly specified an escrow officer and escrow company. Quite possibly this was changed by the seller in a counter offer. Either way, the escrow officer is an impartial third party that cannot act unilaterally or arbitrarily.
Independent escrow companies in California are licensed and regulated under the Department of Corporations, they have strict reporting requirements and bonds are required. In our area, it is typical for each party to pay their own costs, although this is not required. The authority given to an escrow holder is strictly limited by the instructions provided by the parties involved. In fact, if you look at the California Association of Realtors, purchase agreement, its full name is “Residential Purchase Agreement and Joint Escrow Instructions”. So, the agreement we reached with the seller spells out exactly what escrow can and will do.
Once again, if I’m your Realtor I’ll take care of opening escrow. The next big thing is to get you earnest money deposit into escrow. The default in the agreement is for this to be done within three business days. It sends a poor message to the seller to drag your feet on this and can lead to your giving up important good will in future negotiations. That’s right, we haven’t finished negotiating, in fact in many important ways we’ve only just begun. As I said, it’s vital to get your earnest money deposit into escrow in a timely fashion.
You’ll almost certainly do this via wire transfer and this brings up an important caution. We’ve seen a scam going around where someone will send you an email, purportedly from the escrow with wiring instructions. You guessed it, this turns out to be fake and you just emailed your money to a con artist. So, when you do get the email from escrow, take just a few minutes extra and call the escrow officer to introduce yourself and confirm that the wiring instructions are genuine.
As a reminder, your earnest money check amount will be deducted from your final down payment. Should we end up not going through with the purchase, then with signed instructions from both parties your deposit will be refunded to you, possibly with some expenses deducted.
Go back to Step 8 to Buying a Home: I Have an Accepted Offer, Now What?, go forward to Step 10 to Buying a Home: Schedule a Home Inspection.