Your offer was accepted, now what?
In the preparation phase of buying, most of my clients don’t worry about getting their offer accepted or even finding their dream house. They know they’ll find the right house. The majority of questions I get are about escrow: “WTF is it? And what do we need to do during escrow?”
In a paragraph…
Once your offer is accepted, you're “in escrow.” This is the time period where you, the buyer, get to research the property, do your due diligence, and continue negotiating if needed (it usually is). You will hire inspectors to inspect the home, review the seller’s paperwork, and get your loan (if needed) finalized. If you want to know more of the minutia…keep reading.
Day one: your deposit
You have three business days after acceptance to get your earnest money deposit into escrow, and it's typically 3% of the purchase price. I tell my clients to start the wire on day one. The deposit is your first show of good faith, and sending it within 24 hours sets a professional tone for everything after.
Inspections
I start scheduling inspections right away, ideally within a day or two of acceptance. The usual lineup is a general inspection, termite, and sewer, plus chimney and pool inspections if the home has them. If something specific worries you, like mold, electrical, or the roof, we can add those. Get the first round done in the first couple of days, because what the inspectors find shapes your negotiation. I recommend you come to the general inspection, so you can hear about the condition of the property from the inspector personally.
Insurance
You should start getting insurance quotes on day one, and shop around, because the first quote is rarely the best. A referral to an agent you trust beats a generic company name, and I ask the listing agent which insurer the sellers use, since they may be able to cover the house now. If you’re looking in hillside areas in neighborhoods like Studio City, Burbank, or Sherman Oaks, this step has gotten a bit more challenging because private insurers have pulled back across the state of California. The FAIR Plan, the state's insurer of last resort, is likely to be your only option in hillside areas. Once you secure a policy, your lender will review and approve it before closing.
Do your own homework
Ordinarily we will have written a contingency period into your offer. A contingency is a condition that must be met for the sale to move forward. For example, you may have a loan contingency. This means that your offer is contingent upon you being able to secure a loan on the property. If you cannot secure a loan, you have the right to cancel the sale within your loan contingency period (usually a period between 10 and 18 days).
Your contingency period is your time to research the home and the neighborhood. Google the area, look into planned developments, and pull the public records on the house. If the home is in the City of LA, you can search its permit history on LADBS.
The seller’s paperwork
The sellers generally provide four main reports. The Transfer Disclosure Statement and the Seller Property Questionnaire cover what the seller knows about repairs, alterations, and problems with the home, so these documents reflect what the sellers remember (and they can miss things). The Natural Hazard Disclosure tells you whether the home sits in a fire, flood, or earthquake zone. In the City of LA, the 9A report from the city lists any open permits or compliance items, and the sellers are typically responsible for clearing those before closing. Read all of it, and call me with questions.
Appraisal, title, HOA, and leased items
Your lender orders the appraisal, scheduled through the listing agent, and the value comes back to us through the lender. A title company researches the home's ownership history and gives you a preliminary report showing liens, easements, and CC&Rs, so the sellers can hand over clear title (I know this is a lot of vocab, if you want further explanation, download my guide). If there's an HOA, you'll get a package with the rules, budget, financials, and meeting minutes. Read the minutes, because they tell you what repairs and assessments may be coming. Sellers also disclose anything leased, like solar panels or a security system, and any liens, and those may need to be assumed, paid off, or negotiated.
Your loan
While all this happens, your lender is underwriting your loan. Answer their requests quickly, because a slow reply can hold up the whole process.
This is also where rates matter. When you enter escrow, you can lock your rate. A rate lock holds your interest rate for a set number of days. Thirty days is the most common, and 45 or 60 days sometimes are available. Longer locks cost more, and extending one that runs out before closing can add to your monthly payment significantly if rates continue to rise, like they are doing today. Ask your lender when and for how long you can lock before you write an offer.
Renegotiating
Once inspections are done and the appraisal is in, we review everything together and decide whether anything needs to change. You can ask the sellers to complete repairs before closing, ask for a credit toward your closing costs so you can handle repairs after you move in, or renegotiate the price. It helps to have the appraisal in hand first. If it comes in below the purchase price, you can ask for a reduction or a credit, or bring extra cash to cover the gap.
Removing contingencies
When you and the sellers have reached a meeting of the minds and you're satisfied with the property, the appraisal, and your loan, you remove your contingencies. This is the point where the deal becomes fully committed.
The last stretch
The time between removing contingencies and closing can feel like an eternity. Mostly you're waiting for the lender to wrap everything up. A few days before closing, we do a final walk-through to confirm the agreed repairs are done and the home is in the condition your contract describes, and you sign a Verification of Property. You sign your loan documents the day before closing, and the sale records with the city the next day. The home is officially yours the day it records, and I'll meet you there with your keys.
If you want a guide that walks you through the escrow process in Los Angeles, you can download my guide here!
Until next time,
Dana
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