Escrow: Now What?
This is getting exciting! You have just about made it into your very own new home! This is the last step before the property is yours. Use this to help guide you along the way to paying your purchase price and working with escrow payment. Your Realtor®? can help you as well.
The final payment includes a down payment, usually around 20% or more of the purchase price. Obviously, the higher your down payment, the smaller your mortgage, and therefore, the quicker it will be to pay off your home. Gone are the days when you could get 100% financing for housing, but the required down payment vary from lender to lender as well the person acquiring the mortgage.
The escrow service acts as an intermediary between you and the buyer. The payment cheque is held by them and coordinates the process during the period of transfer. The deed to your new home is held until the money clears from one hand to the other. The deposit can be held in a broker’s trust account during this time.
Then the deposit cheque is cashed. The money is applied to the purchase of the home with the mortgage payment making up the remainder of the purchase price. Often, if the sale does not proceed, the entirety of the deposit comes back to you, less any fees you possibly incur.
Escrow periods are often 30 days but can be longer or shorter as agreed between buyer and seller. This is the period when all matters in the contract must be completed, including any work that needs doing or any appraisals, inspections, or final walkthroughs. Be sure to have most of the appraisals and inspections done early to allow for any cancellation that might happen.
Financing contingencies might need to be squared away during this time. If you haven’t come in with a pre-approval, the buyer and seller might have financial contingencies in place to ensure that the financing is complete and assured. If you can’t secure funding, for any reason, the contingency can be removed at the approval of both parties. Otherwise, the contract might be declared null and void.
Part of this process is to secure a healthy, viable title for the property. The title insurance, search, and validation happen during this time. Once the property has been deemed to be free of legal issues or liens, the ownership is free to transfer from one party to the other.
Homeowners insurance is a requirement in Alberta for every home purchase. The purchase of the property depends on the buyer acquiring viable homeowners insurance before the escrow period is complete. Allow for plenty of time to make this happen to allow for all requirements to be met by the insurance provider. Do this step right away after the signed contract is complete.
Utilities need to be handed over and turned on at the appropriate time. The buyer must arrange for the utilities to be switched on prior to moving in, providing proof of the purchase.
Do a final walk-through. This is to ensure that all contingencies left in the contract have been met, that the property is in good condition, and that the buyer is happy to proceed with the sale as is. It’s best to allow plenty of time to check that all aspects of the property are still there. This includes carpeting, lighting, any appliances, and all additions made to the contract by the buyer at the time of the signed contract.
And once you’re are both satisfied, this concludes the escrow period, the purchase of the property is complete, the closing costs are paid, and the home becomes yours. There is truly no better feeling.