How to Buy a House (With Actual Steps) Part 4 Escrow
Once you have an offer accepted you may think that you have bought a house and are finished with the process. Unfortunately, you would be wrong. You have to verify that you want to still purchase the house after conducting several key investigations including reviewing disclosures, home inspection, and appraisal if necessary.
Once the offer has been signed and accepted by the seller the clock starts ticking, the seller has a certain number of days to provide the buyer with all legally required disclosures and then the buyer has a certain number of days after receiving those disclosures to either approve them or cancel their offer. Both these time periods will be set forth in the offer to purchase and can usually be adjusted. Common disclosures include the natural hazard disclosure (NHD) which will specify fault lines flood zones etc. Other disclosures just explain all things that buyers should be aware of and look into such as homes that may have lead paint, or asbestos in some building materials. Some state specific disclosures will have Carbon Monoxide rules or earthquake retrofits that must be completed. Your Realtor should be able to guide you through the disclosure process as it will vary widely from state to state.
The next step will be to conduct a home inspection to discover any possible defects that you or the seller did not already know about. An inspection is not mandatory but is highly recommended and will help you avoid making a purchase that you may later regret. The inspector will usually charge between $200 and $300 and will provide you with an inspection report listing the condition of items on the inspector's checklist. Do not get overwhelmed by the inspectors report as they will likely point out many minor defects along with any major ones. Upon receiving this report it is common for the buyer to request repairs of the major defects listed in the report. Keep in mind that the seller can always say no to your request for repair so do not go overboard on your requests. Also as mentioned before try to keep from requesting the seller repair minor defects as it can frustrate them and make them inclined to turn down your request. For example if there was a leak in the roof of the home that would be a reasonable request to fix. However if a couple switch plate covers are missing or broken it would probably be best to go to your local hardware store and spend the $0.89 on replacements yourself after you close on the home.
Appraisals are another step in the escrow process but are not as common as the steps discussed thus far. If your lender requires an appraisal for you to close on a property then there is not much you can do to avoid getting one. However if your lender does not require an appraisal or you are purchasing in cash you can opt to skip the appraisal and save a bit of money. This is only advised when you are confident in the home value and have already conducted an inspection. For those who do get an appraisal it can be frustrating when the appraisal value comes in lower than what you offered to purchase on the home, sometimes your lender will not allow you to proceed unless you lower your offer price or put more money into a down payment.
Once all inspections and due diligence have been completed escrow will close at the date set forth in the original offer or by any extensions if there were delays in the process. Once escrow closes the house is owned by the buyer and the seller will deliver possession of the property at the agreed upon time. At this point the buyer can move in, rent or renovate the property or any other legal use as they are now the legal owner and have completed the long process of buying a house.