Are you a first time home buyer wondering what happens once your offer gets accepted to buy a house? What’s the timeline of buying a home? How does the process flow once you have an accepted purchase contract? In this episode, we touch on the escrow process of buying a house and discuss each step in that process to help you become The Educated HomeBuyer.
Connect with me 👇 Jeb Smith (huntington beach Realtor/orange county real estate) DRE 01407449 Coldwell Banker Realty ➡I N S T A G R A M ➳ https://www.instagram.com/jebsmith ➡Y O U T U B E ➳https://www.youtube.com/c/JebSmith
Connect with me 👇 Josh Lewis (Huntington Beach Certified Mortgage Expert) DRE 01209148 Buywise Mortgage M:714-916-5727 E: email@example.com ➡I N S T A G R A M ➳ https://www.instagram.com/borrowsmartjosh ➡Y O U T U B E ➳https://www.youtube.com/c/buywiseborrowsmart
✅ – Want to get connected with us or to a local expert in your market, please reach out at http://www.theeducatedhomebuyer.com/expert
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For Show Notes, See Below 👇
[00:00:00] Jeb Smith, Huntington Beach Real Estate Broker: While it’s a new year, we are continuing our discussion on helping guide you through the home buying process. We’ve taken you through the pre-approval process. We’ve taken you through the process of writing an offer, getting your offer accepted. Now we’re gonna take you through the process of once your offer is accepted, what actually happens, what happens during that escrow period?
So if you have a contract written for 30 days, how does that 30 days play out? So, we’re gonna dive into that in a little bit more detail and really help you nail down the home buying process and getting you to the finish line.
[00:00:35] Josh Lewis, California Mortgage Broker: Jeb, I don’t know about you, but two of the most common questions I get are someone comes when they’re just new to the process and they say, “I’d like to buy a home. I don’t know what that means. Where do I start? What do I do?” So, we’ve covered a lot of that ground already. The second one is we have ’em preapproved, we have ’em with the realtor. Maybe it’s you, Jeb, you guys are out looking at homes, you’ve written offers. Now we have one accepted and they look around and they go.
“Okay, we got an offer accepted what next? There’s a lot of things to do and we’re gonna go through those steps, but I don’t know what your feelings are on this, Jeb. The reality is when we’ve done this right, most of the work is already done. There’s some things that cannot happen until that contract is accepted, but the hard work is behind you. I feel like at this point we’re just connecting the dots. Is that about right?
[00:01:26] Jeb Smith, Huntington Beach Real Estate Broker: I agree. The process is very front loaded, especially once you get your offer accepted. A lot of people out there believe, Hey, I’ve got a 30 day escrow or a 45 day escrow. I’m gonna be doing something for 30 days or 45 days if I don’t hear from my agent today there’s something wrong.
There’s a problem in the transaction, and that’s not the case. What we’re gonna do here is walk you through what that looks like so that you can understand where we are as agents, as mortgage professionals in walking you through that process.
So the process is really going to start once your offer is accepted, you have signatures from the seller, signatures from the buyer. You have a binding contract. Escrow is gonna start when that escrow deposit actually reaches the escrow office. If you’re in an escrow state, some states are attorney states and your deposit gets sent to a title office or maybe to an attorney or what have you.
And that’s when the process really starts, right? Part of the contract is that you have here in the state of California is, you have three days to get that escrow deposit into the escrow company. And then that’s when the contract really starts, well, it actually starts on the day that the offer is accepted by both parties.
But you have three days to get it in there, and then everything is really moving forward. That’s when escrow starts the escrow instructions and your lender gets the package from escrow and can really start to move forward. And that’s where we’re gonna start here and actually talk about a couple of things.
But let’s start the process by actually talking about how that money gets to the escrow company, how that process starts initially. Because what happens oftentimes is when you write an offer to purchase a home back in the day what we used to do is actually get a copy of a check. From a buyer showing that you’re writing the deposit, we make it out to escrow company and we say that, if your deposit was $5,000 or $10,000, we would have you write a check for $10,000.
We would take a copy of that and submit it along with the offer. Basically showing good faith that, hey, we have a copy of the check we’re ready to send to end to escrow once that contract is executed. Over the years, it’s changed a little bit. When I write offers, I don’t really provide that these days.
A lot of agents on the other side aren’t asking for it. Now, I know a lot of agents out there still do it because I receive it on listings that I have. But just because you’ve written that check doesn’t mean that money has yet made it to escrow. So you have a couple of different options when opening escrow, and one of those is going to be able to take a check and take it into escrow.
Your agent can do it, you can take it in. But a lot of times the quicker method is going to be by wiring the money, right? So you’re going to get wiring instructions from the escrow company. Typically from some sort of secure portal, in order to protect you against, wire fraud and all these different things, which we can elaborate here in just a minute.
But essentially, you’re going to get this document and you’re going to wire that money into escrow, and that really is where the process starts Josh.
[00:04:12] Josh Lewis, California Mortgage Broker: And Jeb, in most areas of life, When you get these types of warnings, be careful. Don’t do this, don’t do that, it’s over an abundance of caution, but in reality, in real estate and mortgage, there is an awful lot of wire fraud.
Now, it’s not even 1% of transactions. It’s probably not one 10th of 1% of transactions, but it happens often enough that every mortgage and real estate person you know, has either been involved in or heard a transaction of a $10,000, a $50,000, a $500,000 wire going to the wrong place with a bad actor globally intercepting an email sending false wire instructions.
So the easiest way to do that is last thing you do before you send your wire. Call the escrow company and just verify this came from you and this is where you want the wire. Correct. So that’s a really good piece of advice. And the [00:05:00] reason for the wire, you absolutely can do a check, you can do a cashier’s check.
It’s on the front end of the process, so it’s not like that money has to be there and available. So if it takes a few days for a check to clear, not a big deal, but for everyone’s sake, it’s just quicker, faster, easier to get it over there. No one has to manually drive a check over the escrow and no one has to wait for it to clear.
So for us here in, in California, 95% plus of transactions end up with a wire over there. So, Jeb, once that happens, you as the realtor, you have the offer accepted. You’ve instructed your client, send the wire over. The realtor or the borrower sends us a copy of this executed contract. And then we need to know who escrow and title are going to be.
And I say we, we, the lender, need to know who the escrow title company are. The contract’s gonna tell us who the realtors are. We obviously know who our buyer is. So there’s two very important things that we have to do now that we have our sixth item that requires disclosures within 72 hours. That would be the address of the real property that you’re going to buy.
We have 72 hours to get your disclosures out to you. I want to get them out much faster so that you can see, hey, what is my rate if I’m choosing to lock? Or what could I choose to lock today? What’s my cash to close? What’s my payment? Make sure we’re all on the same page once you sign and acknowledge those disclosures now.
We can order an appraisal and you can incur that charge. Prior to that, if I haven’t made those disclosures to you, you can’t even pay for the appraisal. Now, a lot of times, probably 95% of the time, in the interest of not losing any time, we’re gonna order the appraisal on our company credit card before you even signed those disclosures so that we’re.
Actually getting it ordered as quickly as possible. Cause that’s one other potential stressor. So from our end, the first two things we’re doing, introducing ourself to everyone in the transaction, sending out disclosures to you, the borrower, and getting that appraisal ordered. So whether it takes five days, seven days, 15 days to get that back, we can start that clock rolling knowing that we’re gonna have the appraisal back.
[00:07:03] Jeb Smith, Huntington Beach Real Estate Broker: You know, and something important to note here, Josh mentioned, as soon as he gets that accepted contract, he’s working on getting those disclosures. And the reason that this is important is because, as a buyer you should pretty much know your lender, who you’re going to use when your offer is accepted.
What I often see, is buyers scrambling once their offer is accepted, figuring out. What lender am I gonna use or trying to shop a round rate, trying to do different things to figure out where they’re going to go and in turn, delaying the process. The longer it takes you to make a decision on the lender that you’re going to choose with, the longer it takes to get those disclosures out, the longer it takes to order the appraisal, and in turn potentially pushing you out of contract in some sense. If you can’t meet certain deadlines, you can’t close on time.
So just make sure you do your homework in advance. We’ve talked in the past on different episodes about getting pre-approval and the importance of working with a professional. Just do that upfront. Don’t put yourself in a position. Once your offer’s accepted, now you’re trying to figure out who you’re going to go with because ultimately it can backfire.
[00:08:07] Josh Lewis, California Mortgage Broker: Just to close the loop on that, our objective is within 24 hours of receiving that contract, have the file submitted to underwriting. That puts us in a worse case situation where 48 hours we’re in underwriting.
Now, a year ago, it could take seven to 10 days to get an approval back when the market’s really busy. Right now, most lenders are gonna have an approval back in about 48 hours. But what did we just talk about? 48 hours to get it into underwriting. 48 hours, 72 hours to get it back. It’s about five business days.
So now we’re talking a week. You, in that contract, Jeb wrote certain contingency dates in there. We want to have that approval back as soon as possible. What are the things from the loan side for me as a lender that can be stressful? Am I gonna get my loan approved? Is my property going to appraise?
We want to jump on those as quickly as possible. And if you’re taking 2, 3, 4 days, which Jeb, this doesn’t happen often, but probably every six months I’ll be talking to someone. They’re like, “okay, I’m gonna call you back tomorrow. I’m hoping to make a lender decision.” And I go, “okay, cool. When did you get your contract accepted?”
“Well, last Friday.” I’m like, you’re three days into a 30 day escrow and you’re hoping to make a decision on day four, and I know that those contingency time periods started running from the date of acceptance. You are making things stressful for you, and you’re making life hard on everyone. So by all means, do your due diligence upfront. Know who you’re using by the time you start writing offers.
[00:09:24] Jeb Smith, Huntington Beach Real Estate Broker: Yeah, and a lot of these things that we’re talking about today happen simultaneous, you know, while Josh is working on the mortgage disclosures, while he’s working on, ordering the appraisal escrow intern or the attorney or whatever, the title office of the state that you’re in is working on drawing up documents on their side. The listing agent, depending on what they did prior to accepting an offer, they’re working on getting disclosures from their seller. So a lot is happening simultaneously and as a buyer.
You’re getting hit with a lot of these things at one time and earlier I mentioned this process is somewhat front loaded and it’s front loaded in the sense that you get a lot of [00:10:00] paperwork at the beginning of the process. You get the mortgage disclosures, you get your escrow paperwork, you might get the title report, you might get the seller disclosures, you’re doing inspections.
All of this stuff kind of in the first. 10, 15 days of the process. And then there’s a lull, if you will, on your side as a buyer, while the lender’s doing their job, while agents are doing their job, trying to finalize paperwork while the escrow company’s doing their job. And so just understand that there’s a lot going on at one time, but a lot of it happens behind the scenes without you as a buyer knowing what’s taking place.
So with that said, as that offer gets accepted and Josh is working on loan disclosures and working on ordering the appraisal. I, as an agent, working on getting inspections scheduled, right? It’s an important part of the process. In the state of California, the contract gives you 17 days to have your inspections removed on that contract.
In fact, you have 17 days to do all of your contingencies, but most of the time we’re shortening those contingencies to make your offer a little bit more competitive. And in turn, we’re we’re having to meet quicker deadlines. And we’re trying to order that home inspection as soon as you go into escrow.
And, and it might be, you know, we’re in, in charge of the termite inspection just based on how we wrote the contract. You might be a buyer that wants to get a mold inspection or a sewer inspection. So whatever inspections you’re wanting to do as a buyer, we’re working on scheduling those is early in the process as possible.
Because I mean me as an agent, I’m looking at you as a buyer that is going to move forward with this transaction unless something completely falls apart. So we’re trying to get as much of this done upfront so that there’s no delays in the timelines. And the reason I say that is because there’s times when buyers say, Hey, listen, I don’t wanna order any inspections until my loan gets approved or, so my appraisal comes back and I know the value’s there.
I don’t wanna waste money on a home inspection or do these things until I know that I’m moving forward. It’s difficult most of the time to do one of these things stacked behind another and not do them simultaneously because it takes a couple of days to schedule a, an appraisal, sometimes weeks, depending on where you’re located.
It takes a couple of days, maybe even a week or two to schedule a home inspection in some cases because these guys are busy. So you’re having to do a lot of these things with the intent that you’re moving forward. So that’s what I’m working on as an agent to start that process is really working on, the inspections, making sure you’re getting the disclosures, getting the title report, getting the escrow instructions from the escrow company.
And it’s not just me, it’s a team, right. I have a transaction coordinator that’s also helping me with this paperwork as Josh has a loan processor on his side and you’re working with that person. So oftentimes you might be working with another person on a team, but ultimately helping you get to the same goal which is getting past these contingency periods so that you can confirm that you’re moving forward.
So you’ve got your loan disclosures, you’ve done your appraisal, you’ve done your inspections now. Now the next process is kind of a renegotiation of the contract. So negotiation one when it comes to buying a house is getting your offer accepted, right? Once your offer’s accepted, that’s negotiation one.
Negotiations don’t end once your offer’s accepted. Oftentimes there’s a second, third negotiation in the process. You know, your appraisal. What happens if your appraisal comes back less than the purchase price? That’s a renegotiation of the price if you as a buyer want to try to get the seller to renegotiate. More often than not, the appraisal comes in at value.
But the renegotiation happens when inspections take place, right? There’s things that are wrong with the property maybe cosmetically, maybe, just physically wrong with the property, and you as a buyer, Want to get them fixed, or maybe in turn you want a credit to get them fixed.
And so that’s a renegotiation of the contract and that renegotiation doesn’t happen until after these inspections have taken place. So, that’s more or less how the process moves forward. But you know, when does that renegotiation take place? Well, it depends on when your contingencies need to be removed.
So if you’ve taken that 17 day contingency period and shortened it down to 10 days, then you need to make sure that you renegotiating the contract. Prior to that 10 day expiration of your contingencies, if you will. Now, I often have buyers asking, “well, what happens if we start the negotiation prior to that contingency removal but we don’t have an agreement? Like the seller’s not agreeing to what we’re asking… do I still have to remove my contingencies on day 10?” The answer is no. As long as you’re still communicating, still trying to finalize that negotiation, then that contingency’s still out in the open, if you will. Now they can force, you know, by using a notice to perform and doing some other things to, to try to force you to release contingencies and what have you.
But that’s a whole different process and typically doesn’t happen as long as communication is open and as long as that [00:15:00] negotiation is actually ongoing and taking place. And from there you’re removing contingencies. That’s kind of the next step in the process, once these inspections are completed, once the appraisal’s completed, once you have loan approval, which we’ll have Josh elaborate here on in just a minute.
And you’ve reviewed the seller disclosures, You’ve reviewed the title report, reviewed the HOA docs, if there’s HOA docs. You’re at a point now when you can release contingencies on the property, and that’s when that escrow deposit that you initially put in that good faith deposit that we started the process with.
That’s when states like California, that money becomes non-refundable at that point. That’s when that money is at risk. I often have buyers asking, “well, if I put this money into escrow, do I get it back if I cancel escrow? is it refundable?” And the answer is typically yes until you release these contingencies, at which point contingencies are released.
Then you know, then it’s kind of that lull that I was talking about earlier where there’s not really a lot that happens on the real estate side during this process, but you’re likely continuing to fulfill conditions on the mortgage side.
[00:16:04] Josh Lewis, California Mortgage Broker: One of the biggest misconceptions that we get all the time is, “Cool. My loan’s approved. I’m done. Right?”
Your initial loan approval is always going to be a conditional approval. I’ve never seen a loan get submitted and come back with zero conditions. I’ve seen one come back with zero borrower or conditions, but there’s always something that is required from title, from escrow, from one of the agents in terms of dotting I and crossing ts in the contract.
So it’s important to note that we are going to go through the loan approval with you, and we’re gonna go through all of the conditions that apply to you and the remaining conditions in the file so that you can know, are there any deal breakers in there.
So the misconception is that you don’t release your loan contingency until you have unconditional loan approval, until all those conditions are cleared. Just to put it in context, I have a deal that’s closing on Monday. We’re working on clearing the last conditions today. That’s how far it goes into the process.
Some of these things cannot be completed till the very last minute. Some of the things kind of relate back to other stuff that Jeb was talking about. Let’s say there’s, some termite issues and the appraiser calls it out. We get the termite report done and the seller has agreed to do it. Well, we need to have a reinspection to verify that that termite completion was done, so that can come down to the 11th hour.
It can be coming in right the day that we fund the loan. So really as a lender, my job is to go through and say, are any of these deal breakers? Are any of these items, if you provide me this item, could anything in there be an issue for us? Like oftentimes they’ll say, I need an updated bank statement. We go, Hmm, could there be anything in that bank statement that could be a problem?
So our job is seeing around corners, making sure you don’t have problems. We are never going to allow you to release that loan contingency if there’s an issue with the loan or if there’s a potential deal breaker in there. At that point in time, we’ll get on the phone with your realtor. We’ll get on the phone with the listing agent and say, “Hey, here’s where we’re at with the loan. We’re good with all of this. Borrower is getting me X item. As soon as X item is signed off, we’re absolutely cool releasing the loan contingency.” And with that, Agents are understanding. Jeb said this a million times on here. I can deal with communication. You can’t just go silent and not perform according to the terms of the contract.
That’s pretty darn rare. Most of our loans, we’ve done all the legwork up front. I have two borrowers right now that were just finishing their pre-approval, very well qualified borrowers, but with little curve balls, little quirks in their file, and we are putting those together and sending them to underwriting now before they even write offers so that we know we’re not pushing that out.
So hopefully the lender that you’re working has that ability to kind of look and see around corners, takes that philosophy of let’s get this cleared as early in the process as possible, if not even before writing offers, because of all of these things it is probably the most important.
It doesn’t involve the seller. It doesn’t involve your realtors. It just comes down to do you qualify. You know, home inspection, something can come up, but you can negotiate that. An appraisal, something can come up, you can negotiate that. There’s not a lot of negotiation in terms of the loan. It is what it is, so we need to front load that and move it as early in the process as possible.
[00:19:16] Jeb Smith, Huntington Beach Real Estate Broker: Yeah. And then the next couple of steps can kind of interchangeable depending on where you’re located, how your lender operates, but you know, usually what happens is your closing disclosure is going to go out from your lender and Josh, you can talk about that in a little bit more detail, how soon that goes out, when can that go out.
But then you’re really, then you’re signing loan docs. And the process of signing loan docs Josh, I kind of wanna elaborate on that a little bit because people often think that, “Hey, I signed the initial loan, application, I’m good to go. I’ve signed everything I need to sign.” And the reality is, no, you gotta sign the actual loan documents in front of a notary.
Sometimes it’s at a closing office, sometimes it’s at your house. But that’s really the next step in the process. Josh, let’s talk about what a closing disclosure [00:20:00] is. When does that go out, and how does that, how does that get us to the next step of actually getting loan doxy?
[00:20:06] Josh Lewis, California Mortgage Broker: So 15 years ago, there was no such thing as a loan estimate or a closing disclosure.
You would get what was called a good faith estimate. And by good faith, they meant it was just good faith. You were trusting that the person that you were talking to knew what they were talking about and was honestly giving you an estimate of all the things you’re gonna have to pay at closing.
Well post 2008 meltdown, the government came in and said, this is not working. People are not being told what they need to know, and they’re getting shocks, not surprises, they’re getting shocks when they go to sign their loan documents. So now we have a system where you get a loan estimate upfront. The loan estimate is part of the documentation.
It’s the most important part of those disclosures, that I have to get out to you, that any lender has to get out to you within three days of receiving your contract. With that, the loan estimate tells you this is what you’re likely to pay and all of the things on there have various tolerances.
Some of ’em have zero tolerance. They cannot change from the loan estimate to the closing at all. Some of them can change up to 10%, and those are generally things that you can shop for if you don’t have any control over it, we have to disclose it correctly upfront, and there’s no deviating from that.
[00:21:12] Jeb Smith, Huntington Beach Real Estate Broker: And what are some examples of that?
[00:21:14] Josh Lewis, California Mortgage Broker: Any first party charges, points that we’re going to charge is the big one. So in box A on your loan estimate, those are all things that are paid to the lender. So if the lender says, Hey, there’s no processing fee, so there’s nothing for a processing fee, and the loan estimate, then the closing disclosure goes out and says $800 for a processing.
Nope, cannot happen. You didn’t disclose it upfront. So box A is gonna tell you all your first party stuff, and that’s the one that nothing can ever change in without a valid change of circumstance. Well, what does that mean? What’s a valid change of circumstance? Transaction doesn’t close on time. Rates have gone up. We need to get a rate extension. It’s not the lender’s fault that it didn’t close on time. If it’s the lender’s fault, it technically should not change. But assuming new construction and it wasn’t done on time, we had to get an extension for 15 days, that would fall under box A.
Some of the things like escrow and title, it depends on how they are disclosed. Recording fees have to be disclosed correctly cuz you do not get to shop for those. But escrow and title, if you have the ability to shop for them and how they go out in the disclosures, those are the things that can change a maximum of 10%.
So they can’t vary a ton. You can’t be shocked at closing. So that closing disclosure, now we know more about the transaction. Maybe you guys renegotiated appraisal came in and you negotiated the price. $10,000 lower or renegotiated a $5,000 seller credit. The closing disclosure’s gonna show all of those items on there, and you have to have that to review at least three days prior to signing your loan documents.
Now Jeb, you asked about timing of it. For us as soon as we have a loan approval, an appraisal and for the most part your homeowner’s insurance cuz that’s another cost in there that we need third party validation on. Once we have those three items, we’re going to send that closing disclosure out so that we’re not tight here at the end waiting and saying, oh cool, loan docs are out but you can’t sign for three days cuz the closing disclosure just went out.
So when you get your loan documents, an important distinction here, Jeb, that I always like to tell people, the loan documents are truly where the rubber hits the road. You signing your initial disclosures is saying, “yes, that’s what I want. That’s the loan I’m applying for, and I am agreeing to that rate, those fees”, but you are not signing up to take on that loan.
People always ask me, when can I back out? When can I change a lender? Am I saying I am borrowing $482,000 when I signed my disclosures? No. You are doing that when you sign your loan documents. In the loan documents, it’s much like your initial set of disclosures. It is a huge pack of paperwork, 90% of which is, uh, irrelevant boiler plate that is in there for the purposes of the lender because they got sued somewhere along the line, so they clarified something, or it’s a government mandated disclosure that they have to make to you.
So what we like to do before you go in to sign your loan documents, We send out your estimated closing statement from escrow. So escrow’s got those docs, they’re gathering all the third party charges. So above and beyond the cd it’s even more accurate. So it’s gonna show you what you’re expected to bring in in terms of cash to close. We’re gonna pull out your first payment letter that goes in the loan documents, and it’s gonna say, principle and interest is this, taxes is this, insurance is this, they’re impounded, they’re not impounded. There’s mortgage insurance.
And then we’re gonna pull out the note. The note is going to say, You owe $482,000. It’s 5.75% interest, and it’s a 30 year loan. So those are really the most important things. If you and I review those, if your lender and you review those before the notary comes out to sign your loan documents, before you go to title, to sit at the closing table with everyone and sign your loan documents, that’s the important stuff.
The other hundred pages in that documentation is there for the benefit of other people to make sure they don’t get sued. But, you know with the review of those documents, what your payment is, what you’re borrowing, what your interest rate is, and how much money [00:25:00] you’re gonna bring into closing, and that, that matches your original loan estimate.
[00:25:03] Jeb Smith, Huntington Beach Real Estate Broker: And Josh, you said something important there and that’s the the fact that you’re going to get how much money you need to bring into escrow to close. So you’re going to get your final closing statement, if you will. Not the final, but an estimated, showing the amount of funds you need to bring in based off the escrow deposit that you originally put in, your closing costs and your total down payment.
So if you put a 3% escrow deposit down to start, but you put 20% down to buy that house, then you need to bring in the remaining 17% right? Plus any additional closing costs down there in order to finalize this loan.
And your loan can’t record. It can’t fund until those funds are at title, at the escrow company. And that’s something you’re going to do after your loan docs are signed. Typically speaking, you’re at the closing office, you know , the notary there, whoever’s in front of you, the title officer is going to provide you with that estimate, and you’re going to take that estimate to the bank the next day and you’re going to wire that money or get a cashier’s check for that amount.
Now, Josh, we mentioned earlier in the episode, if you’re wiring that money, it’s really, really, really important on the final wire of these funds to verify the, because that’s the big wire, that’s the big wire.
They’ve had the process to see the email exchanges going back and forth. They know what’s going on. This is when you know if the wire fraud’s gonna take place, it’s typically gonna take place on the backside. The initial deposit is at, I would say, less of a risk, still a risk, less of a risk than the final deposit.
So you’re wiring a lot of money here. At the end of the transaction, just make the additional call to the escrow company, to the co title. Verify the wiring instructions, verify the information you received, just to make sure it’s accurate before sending that wire. That wire goes there and then that’s essentially going to take some days your loan might fund the same day, depending on what state you’re in.
It might fund the next day. It might fund two days later, depending on the actual process there. You have a closing date with your lenders trying to meet. Some days you might sign your loan docs a week in advance, depending on how fast your lender was able to get you there. So there might be a delay in the time that you’ve signed to your closing date, just based on how quickly that process went, or in some cases, maybe how slow that process went.
Maybe you’re signing ’em at the last minute, but you’re typically trying to close on that last day. And in some states, like here in California, depending on the county that you’re in, you might record the same day that the loan funds in other counties here in California, it records the following day. At which point, that’s when you get the keys to the property.
Now, one, one step I missed here in the sense is that, You’re going to do a final walkthrough on that property, right? Oftentimes, not all the time. More often than not, you’re going to do a final walkthrough. Now, that final walkthrough can happen before you sign loan docs or after you sign loan docs, just depending on where you are in the process, how much time you have, and that’s really just a re-verification of the property, right?
When you walked through the property, initially, you saw it with furniture in it, you saw it with all the belongings of the previous owner. More often than not, your final walkthrough is coming at a time when the seller’s property has been removed. It’s already been packed up. You’re able to see the property vacant.
Maybe there were repairs negotiated as part of your repair request, and they’ve completed those repairs and you’re walking through the property to make sure those repairs were actually completed properly. In a, a work-like manner, by a professional or whatever, you’re trying to reconfirm, it’s typically done during that final walkthrough.
Now sometimes there’s tenants staying in a property, a seller’s renting back for 30 days. There were no repairs renegotiated. So sometimes there’s not a final walkthrough of a property, but more often than not, the buyer wants to walk through and just make sure that the property’s in the same condition.
What happens if the property’s not in the same condition? There’s a new hole in the wall, or the repairs weren’t completed. Well, then you don’t have to close on that property. It’s up to your agent. It’s up to you and the other parties to renegotiate to get those things finalized prior to closing on that property. Because once the property closes, It’s much harder to get those items completed.
Now, fortunately, and unfortunately, I’ve been in the case where I’ve closed on properties and we’ve had to do things after the fact, and they’ve worked out. But it’s some, in some instances it comes with having to push people and threaten the other side to make sure these things are completed. So it’s better to make sure it’s done prior to closing.
We’ve talked about the idea of signing loan docs. We’ve talked about the idea of wiring those funds and it’s really closing, Josh. So what happens at closing? Is that when you get to party, is that when you get the keys?
[00:29:37] Josh Lewis, California Mortgage Broker: That timeline is a big question for everyone, and this varies around the country. You may be listening outside of California. You may be at a state where they have a closing where you, the seller, the attorney, everyone sits around a table and the funds went with a check to the title company and you sign your loan documents and it all happens, right there.
For us in California and [00:30:00] for many other escrow states, it goes like this. You sign your loan documents, you and I went through and say, “okay, you need to send $73,000.98 over to escrow. You wire that over. So a lot of times I’ll get that question. “Okay. I signed docs and I wired my money as the house mine?
No, because your money went to escrow. The funding is actually when the lender’s money goes over to escrow. So with that, we talked about conditions and conditional loan approval. At that point, there’s generally not conditions from you. But escrow and title and the lender can be working on just connecting the last few dots.
Usually it’s a formality, three to five little items. They go back and forth on the day of the funding, and now that wire goes over. So in this case, now your funds are at escrow, the lender’s funds are at escrow. Everything is funded. The house is not yours until it’s released for recording and the county recorder records that deed that says John and Jane Doe are no longer the owners. Martine Rivera is now the new owner. And at that point you can reach out to your realtor and per the terms of your contract, you will get keys and possession of the property.
[00:31:10] Jeb Smith, Huntington Beach Real Estate Broker: Oftentimes us as real estate agents, mortgage professionals, we know about the closing prior to you, with the county recorder, because the title office is calling us, the lenders calling us, whatever, and letting us know, “hey it’s funded, it’s recorded, it’s a done deal. Congratulations. We appreciate the hard work”, all of that.
And then it gives us the joy, and being able to call the buyers and say, congratulations, the home is yours. And we set up a time to, to pass over those keys. But Josh said something important there. It doesn’t happen until it actually records.
I’ve been involved in transactions where the transactions were funded And it didn’t record. The wire was called back for whatever reason. So just to understand, in this process, nothing is done until it’s done, until you have those keys in your hand. And that’s not to scare you, it’s just to provide some transparency that things can happen in the process and you just wanna make sure that you’re following through not doing anything crazy on your end to jeopardize it. Making sure you have your job, not quitting your job before your loan closes.
We have stories of all of that too, that we could talk about in another episode. But that really gets you to the final stage of the process of closing on that home. So at this point, you’re a homeowner. You own a home. We’ve, walked you through that journey, so congratulations on getting there. Josh, what’s next?
[00:32:25] Josh Lewis, California Mortgage Broker: What’s next? It’s the quiet enjoyment of your home. For most people, you wanna start your projects. You wanna figure out where your big screen’s gonna go, who’s coming over for the barbecue? So Jeb and I, for the most part, just wanna know when the housewarming party is…
[00:32:37] Jeb Smith, Huntington Beach Real Estate Broker: we’re available…
[00:32:38] Josh Lewis, California Mortgage Broker: …what we can bring. We’re available.
[00:32:39] Jeb Smith, Huntington Beach Real Estate Broker: No. So with that said, guys, hopefully that provides some clarity in that process. We appreciate you joining us along this journey of walking through that process and helping you become The Educated Homebuyer. Then see you soon.
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