Imagine, if you will. Your real estate agent just called to give you the good news that your offer was accepted! You have been looking for a while. You got pre-approved for a loan and found an agent you like. You made a couple of offers, but nothing worked out. Now your agent is telling you that your offer was accepted and escrow is about to be opened. Now what?
I’ll explain.
The First 10 Days After Your Offer is Accepted
Congratulations on getting your offer accepted. It is a big step and an accomplishment, but there is still a lot left to do. Even with the guidance of a capable real estate professional, it can still be nerve-wracking.
Take a deep breath, stay calm, and enjoy the feeling of progress. You have a lot to do over the next few weeks, so you better get started.
The first ten days will likely be the most important. Buying real estate is a lot of hurry-up and wait. The first ten days of escrow are the hurry-up part. If you stay on top of everything during the first ten days, then you will set yourself up for success.
10 Things for a Buyer to Do During the First 10 Days of Escrow
- Make a “good faith” deposit into escrow: The California Association of Realtors®, commonly called CAR, Purchase Agreement has a default of 3 business days from Acceptance for the Buyer to wire transfer the initial funds into escrow. Most agreements have the buyer depositing between 1% and a maximum of 3% of the purchase price to open escrow. Practically all “good faith” deposits are refundable throughout the contingency periods, and most escrow companies will not produce escrow documents until the deposit arrives. Therefore, you must get your deposit in to get started.
- Provide proof of funds: If you did not provide proof of funds sufficient for the down payment and closing costs when presenting your offer, the CAR Purchase Agreement has a default of 3 days to do so. This applies to the entire purchase price and closing costs for all cash transactions.
- Engage your lender: Your lender needs to be informed that you are under contract. They will need a signed copy of the Purchase Agreement and escrow information ASAP. If you did not provide a pre-approval when you presented the offer, the CAR Purchase Agreement has a default of 3 Days after Acceptance to show you have applied for a loan. Your lender has a lot to do and needs to get started. Modern regulations have added extra time constraints on lenders, which slows down the process. Even if you have a pre-approval, your lender will need to update documents and get the appraisal ordered. Buyers are typically asked to remove the appraisal contingency within 17 days, so the sooner you start, the better.
- Secure home insurance: This one has become more important than ever, given all the craziness going on in the insurance market. There could be a problem with the area, the property itself, past claims on the property, or even past claims that you have made on a different property. The CAR purchase agreement has a default of 17 days for you to release the insurance contingency. You don’t want to release all contingencies only to find out there is some sort of unexpected problem getting insurance.
- Perform home inspection: The CAR default is 17 days for inspections, but 10 days may be more common. No matter how many days you may have, general home inspections frequently lead to more inspections. For example, a home inspection might find potential problems that may require additional inspections with inspectors that have specific areas of expertise, like electricians or structural engineers. Plus, issues discovered during an escrow often need to be bid on to price and remedy. These things take time, so the sooner the better.
- Review disclosures: The CAR contract gives the Seller a default of up to 7 days to provide formal disclosure papers to the Buyer. The purchase agreement gives the Buyer a default of 17 days or 5 days after delivery, whichever is later, to approve those documents. This includes disclosures made directly by the seller and agents, like the Real Estate Transfer Disclosure, and those that must be ordered from a company, like the Natural Hazard Disclosure. You will get presented with a lot of disclosures; go through these disclosures as soon as you get them because there may be information that could lead to more questions and investigation.
- Sign escrow instructions: The CAR purchase agreement gives the Buyer up to 5 Days after Delivery to sign escrow instructions. These are the instructions escrow needs to follow to move forward. Included with these instructions is a statement of information you must fill out for the title company so they can issue title insurance. Fill everything out and return ASAP. If you have questions, you can call your agent or, even better, call the escrow company directly, as they are often best suited to help.
- Review Preliminary Title Report: The Preliminary Title Report is something that is often overlooked. The purchase agreement gives the Buyer a default of 17 days or 5 days after delivery, whichever is later, to approve. It may seem like a long, confusing legal document. It states the legal description, if anything is owed on the property, along with any easements and those sorts of things. It is rarely an issue, but you should look it over just in case. Ask your agent and the escrow officer to review it too, just in case. Occasionally, there is something in there that will matter.
- Review HOA documents: This only applies to properties that are part of a Common Interest Development, commonly known as a Homeowners Association. These documents are typically ordered by escrow with payment from the seller and then processed by the management company. That’s why they sometimes take a while to receive. Review these documents when they come in. You should also do a little research about the community first and ask questions you may have ahead of time to reduce the chance of any surprises.
- Review any leases: This applies to properties with tenants and properties with leased items such as solar panels. The purchase agreement gives the Buyer a default of 17 days or 5 days after delivery, whichever is later, to approve any leases. The leases run with the property; you should know what you are getting.
Practical Advice – There is a lot that needs to happen in escrow, yet much of it requires the coordination and cooperation of various service providers and the other party in the transaction.
There will likely be some surprises along the way, and you will have to work through them. Stay calm, focus on the big picture, and you will come out ahead in the long run.
The first ten days are the busy part, so make each day count, and you will be set up to succeed.
Bottom Line
The first ten days after your offer is accepted will likely be the most important. Buying real estate is a lot of hurry-up and wait. The first ten days of escrow are the hurry-up part. There are 10 things for a buyer to do during the first 10 days of escrow.
The buyer needs to make their “good faith” deposit into escrow and provide proof of funds if they did not do so when presenting their offer. The buyer needs to engage their lender with a signed contract and escrow information, and they need to secure home insurance. They need to have a home inspection and review the disclosures. The buyer needs to sign escrow instructions and review the preliminary title report. If the property is part of a Common Interest Development, the HOA documents will need to be reviewed along with any leases that go with the property.
Not everything will go as planned, and there will likely be more negotiations along the way, but if you stay on top of everything in the beginning, you will be set up to succeed.
For Real Estate Advice
We hope that you found this helpful and informative. If you are looking for a real estate broker to guide you through the sales process or a reliable property management company to help you handle a rental property in Long Beach, Los Angeles, or Orange County, California, or you are just considering it and have a few questions about real estate, contact the Mike Dunfee Group today! We are happy to help.
Dunfee Real Estate Services, Inc.
DRE # 02026232
