Surviving the Escrow Process

Congratulations, you have made a successful bid on a mountain property!  This will be a very exciting (and somewhat stressful!) time for you.  But if you follow these suggestions (and your realtor’s advice), you’ll soon be the proud owner of a new home.

When you sign your contract, your agent will ask that you deliver your earnest money deposit (usually less than 3% of the purchase price) made out to the title company you have selected.  Once the terms and conditions of your offer have been fully negotiated, escrow will be opened and this check will be delivered to the title company.  The title company will cash the check and deposit it to your escrow account.  Make sure that there are sufficient funds in your account to cover your deposit check.

The deposit money will be applied to the purchase price of the home. If for any reason the sale is cancelled, you may be entitled to receive all of your deposit back, depending on what contingencies you might have removed and where you are in the escrow process at the time of cancellation.  In Arnold, buyers typically pay for their inspections, so if escrow is cancelled after inspections have occurred, these fees will most likely be deducted from your deposit.  There are cases where the seller may be able to retain the deposit money as liquidated damages. While your agent will explain the liquidated damages clause to you when drafting your contract, it is advised that you speak to legal counsel to help you fully understand the ramifications of this clause.

The escrow time frame is typically 45 days in the Arnold, Big Trees, Murphys and surrounding areas.  This allows plenty of time for all inspections to be completed, and for your lender to process and fund your loan.   During this time, each item specified in the contract must be completed satisfactorily. By the time you have opened escrow, you will have come to agreement with the seller on the closing date and the contingencies. Each contract is different, but many include the following:

1.    Inspection contingency: The usual period for inspections in the Arnold area is 21 days.  This allows for a thorough inspection of the property, including the all important septic inspection.  The septic inspection includes uncovering the septic tank and running 200 gallons of water through the outlet pipe into the leach field.  If the leach field accepts this amount of water in less than 30 minutes, the system is considered to have passed the “load test”.  The septic report will reveal what type and size septic tank is present, and whether the tank needs to be pumped out.  If the leach field fails to pass the “load test” a further inspection of the system will be called for, which will determine whether the leach field can be repaired or has failed completely.  Other recommended inspections include: pest, roof, home inspection, furnace/A/C, wood stove, property corners, etc.  It is important that all of the inspection results be obtained in a timely fashion as unsatisfactory results may ultimately result in cancellation of the contract.

2.    Financing contingency. A standard part of the contract here in Calaveras County is for the financing contingency to remain in place right up until the loan funds.  In many other areas you are only allowed a specific number of days (usually 17 -21) to secure your financing.  Here in Arnold, we customarily extend the contingency for nearly the duration of the escrow period.  This means if you are unable to qualify for your loan, the interest rate changes, or a job change/loss occurs during the escrow, you have an escape route based on financing, and should receive your deposit back, less the cost of any inspections you’ve obtained.

3.    Title contingency: Your agent will assist you in making a thorough review of the preliminary title report.  The title company will mail this directly to you within 7 – 10 days of escrow being opened.  Once you receive it, you and your agent will carefully review it to ensure there are no tax or HOA liens, and to verify the ownership information.  This allows you to ensure that clear title will be passed from seller to buyer in the transaction.
Once escrow is opened, you should look into securing homeowner’s insurance. This will be required by the lender if you are obtaining a loan, and is highly recommended in any case. Your real estate professional at Cedar Creek Realty will be able to refer you to a number of area insurance agents who can assist you in purchasing insurance coverage for your new cabin.

When you reach the latter part of escrow, your agent will send you a contact sheet for local utility providers.  Typically, you will need to contact PG & E and the Calaveras County Water District, notifying them of the ownership change.  You will also want to decide on television/satellite, telephone and internet service providers.  Your agent will order a meter reading for the day escrow closes from the propane service provider.  Propane is pro-rated at close of escrow, so you will receive a bill for whatever propane is in the tank and the seller will receive a reimbursement in the same amount.
In concert with your agent, schedule the final walk-through inspection. At this time, you should make sure that the property is exactly as the contract says it should be, and that any agreed-upon repairs have been completed.  If you negotiated furnishings, décor, appliances and other items of personal property in your purchase contract, you should go to the walk-through armed with a check list of those items to ensure they all remain in the house and are in good working order.

You’ve made it! Once the sale has closed, you’re the proud owner of a new home. Congratulations!  But the assistance of Cedar Creek Realty does not end with the close of escrow. We are your local area connection for all of Calaveras County, Arnold, Murphys, Bear Valley, Dorrington, Avery and beyond for vendor references, weather and snow reports, or just a friendly hello.  We are here for you through close of escrow and beyond.