The Beverly Hills Home Closing Process

This article will provide a general timeline so home sellers know what to expect next steps in closing process

You are accepting an offer in your Beverly Hills home closing process. If so, congratulations! Or maybe you are thinking of home selling and want to learn more about the closing process. Either way, you have come to the right place.

So, how long should everything take? Should I refer to an escrow timeline? What happens next? Erik Brown Realtor can help you with this thing smoothly and easily and provides his excellent marketing strategy for selling your Beverly hills home fast!

Every sale varies, but in general, escrow usually takes between 30 to 60 days to the closing process. During contract negotiation, you and the buyer agree to an escrow timeline. This article will provide a general timeline so home sellers know what to expect next steps.

Open An Escrow Account

Once an offer to buy the property has been accepted by the seller, and a purchase agreement contract has been signed, escrow begins.

• How does an escrow account work – to set up your mortgage escrow account, the lender will calculate your annual tax and insurance payments, divide the amount by 12 and add the result to your monthly mortgage statement. Each month, the lender deposits the escrow portion of your mortgage payment into the account and pays your insurance premiums and real estate taxes when they are due. Your lender may require an “escrow cushion,” as allowed by state law, to cover unanticipated costs, such as a tax increase. If the estimated amounts are higher than actually needed, the overage balances will be refunded or credited to you.
• Find the Right Escrow Servicer – after the purchase agreement is secured, the next step is to find a suitable escrow service to open an account. This process may differ depending on where you are, so be aware of any necessary actions you need to take in your area. For instance, escrow for Beverly hills typically requires an escrow agent to help organize the escrow process for a buyer and seller. The escrow company that is employed has to be the result of an agreement between the two parties. Both buyer and seller have to agree on an escrow company that they concur is the best for the job. Cooperation is key!
• Make Earnest Money Payment – once an escrow company is found and agreed upon, the next step towards fully opening an account for buyers is making an earnest money payment to the escrow servicer. Earnest money is a gesture of commitment and good faith that shows that the deal is serious and the buyer is ready to move forward. Once the payment is received, third-party escrows will assign an official account to the buyer and seller and kick the process off.
• Escrow has to be funded – which means a fraction of the down payment (referred to as earnest money deposits) is deposited into the escrow account by the buyer’s real estate agent. This ensures the buyers put some skin in the game, demonstrating their seriousness about the purchase. Your escrow officer will send you your specific escrow instructions. Typically, the package will include your grant deed to notarize, escrow instructions to sign, commission instructions, tax forms, Statement of Information, and payout documentation. The seller must get these documents back to escrow promptly for escrow, title, and the lender to process.
• Escrow Analysis Works – your mortgage servicer will estimate the amount to be paid for your real estate tax and homeowners insurance bills. This estimate, provided during the closing, is based on the taxing authority and insurance company, or previous tax and insurance bills. Each year, your mortgage servicer will analyze your account to make sure you’re paying the right amount to maintain the minimum required balance. Because it’s based on an estimate, the amount can be overestimated or underestimated. This is called an escrow shortage or overage. If there’s an overage, you’ll get your money back with a refund. If there’s a shortage, you’ll typically have a couple of options to pay the remainder. Your first option is to pay the full shortage upfront. Another option would be to pay the shortage over 12 months along with your regular payment. However, this option may not be allowed by some servicers.

An escrow account is held by a third party on behalf of the buyer and seller. A selling home involves multiple steps taken for weeks. Therefore, the best way to prevent either the seller or the buyer from being cheated is to bring in a neutral third party. This third party can hold all the money and documents related to the transaction until everything has been settled. Once all procedural formalities are over, the money and documents are moved from the escrow account to the seller and buyer, thus guaranteeing a secure transaction.

Disclosures

Understanding disclosure matters, purchasing a new home, or refinancing your current one, you must understand all the terms of your loan before you sign on the dotted line. The reason for this is that once you sign, you’re committing to the conditions presented, regardless of whether there are any mistakes in the paperwork.

That means it’s crucial that you carefully read the disclosure your lender sends you. As one of the final forms you receive before you close on your new loan, the disclosure will list the terms and costs associated with your mortgage, allowing you to compare them to those listed in the Loan Estimate form you were given at the beginning of the process.

The Disclosure Statement details the specific charges that will pay into escrow each month as part of a mortgage agreement.

1. Your monthly payment includes your current payment for principal and interest on your loan plus extra money put into “escrow” for upcoming tax and insurance bills.
2. This section shows how your escrow money will be spent. Each line includes your monthly escrow payment, any disbursements (withdrawals)to pay taxes and insurance bills, and the running balance held in the account. Note that the escrow amounts could change over time. Also note that anything that is paid out of the escrow account, you will not have to pay separately

After the buyers perform their due diligence and investigations on the property. The home must be available for the buyer during this period. The seller must also keep on all the utilities through the close of escrow. The buyer receives a list of disclosures about the house or property as mandated by state law. The disclosures provide information on known problems or defects for that area or the age of the house, such as a leaky roof or flood insurance. Disclosures benefit the buyers because they know what faults the property has. Disclosures benefit the sellers because they believe the known faults were built into the agreed-upon price by the buyer; therefore, the seller won’t be as willing to go down in price during negotiations.

Home inspections happen next. These are to see if any or all of these systems have issues that require repair.

Home Inspections

What does the home inspector do? The home inspector will produce a report of any construction defects, indoor and outdoor system defects and the condition of appliances. The inspector will also note if he sees anything that needs additional inspection or repairs.

Find A lender – in most cases you will need a preapproval letter from a lender (whether it’s a bank or any other financial institution) to make an offer on a home, to prove that you can afford the purchase price and that someone is ready to lend you the money. If possible, tee that up well in advance of finding your dream house. “One of the biggest mistakes first-time homebuyers make,” is not speaking with a bank or mortgage broker before starting the process of looking for a home. It’s disheartening to find a home you love only to realize you don’t qualify for the mortgage you need to assist with the purchase.

Title – a title provides peace of mind and a legal safeguard. They ensure that when you buy a property, no one else can try to claim it later. A title is an examination of public records to determine and confirm a property’s legal ownership and find out what claims, if any, exist on the property. If there are any claims, they may need to be resolved before the buyer gets the property. And here Title insurance is indemnity insurance that protects the holder from financial loss sustained from defects in a title to a property. It protects both real estate owners and lenders against loss or damage stemming from liens, encumbrances, or title defects.

Complete Home Inspection – a physical home inspection is a necessary step to discover any potential problems with the property and get a look at its surroundings. If you find a serious problem with the home during the inspection, you’ll have an opportunity to back out of the deal or ask the seller to fix it. You can also have the seller pay you to have it fixed (as long as your purchase offer includes a home inspection contingency).

Included In The Inspection? The home inspector looks for obvious visible defects of:

• Building Exterior: siding, roof gutters, downspouts, foundation, driveway, fences, patios
• Landscaping: sprinklers, property grading, and drainage
• Walls and Ceilings
• Doors and Windows
• Attic and Insulation
• Fireplaces and Chimneys
• Electrical System: panel, switches, outlets
• Heating and Air Conditioning: ducts, registers
• Plumbing System: pressure, supply lines, valves, waste lines, hose bibs, water heater, bath fixtures
• Appliances: sinks, dishwasher, refrigerator, oven, stove
• Garage Door and Garage Door Opener

Additional inspections a buyer can order standard inspections do not include many tests that a homeowner may want to have done. Here are six more to consider:

Pest Inspection – Most buyers ask the sellers to pay for this inspection. A buyer may still want to pay for the inspection if the homeowner won’t. The termite company doing the inspection will look for evidence of termites and other wood-destroying pests and provide a report of their findings to the buyer, seller, and agents. This inspection should be done in the first week also.

Asbestos Inspection – If you are buying an older home, you may want to have it checked for asbestos. Asbestos is a known health hazard and can lead to severe lung conditions, including asbestosis and cancer.

Gases and Chemicals – An inspector can check for gases and chemicals and gases like Radon, Formaldehyde, and Methane gas. They will recommend ways to remove the contaminants in their report.

Mold Inspection – A mold inspection will check for dampness in the building materials in your home, including the drywall, insulation, around window casings, bathroom cabinet, and others.

Pool and Spa Inspection – If you are buying a home with a pool or spa, you will want them inspected since these are potentially expensive items to repair.

Environmental Inspection – If you are in areas subject to floods, earthquakes, or other natural disasters, your lender may require geologic/soil reports or require you to obtain flood insurance. Check with your lender or agent for specific requirements. The inspector may recommend a specialist for the fireplace and chimney and roof.

Geologic Report – areas subject to earthquakes may require a soil report and or a geologic report to assess the risk of serious damage to the property in the event of such a disaster. You may also want to consider a flood report. If the home is too likely to flood, you won’t be able to get homeowners insurance, which means you can’t get a mortgage. In some cases, purchasing flood insurance in addition to your homeowner’s insurance will solve this problem.

Inspections Timeline

Week One:

1. Home Inspection
2. Agent Visual Inspection-The buyer’s agent visually inspects the home and property and writes up their findings, which are then signed by both the buyers and sellers.
3. Appraisal- Required by your lender, paid by you, the buyer.
4. Any other inspections required by the lender or ordered by you.

Week three:

1. Inspections are done by this time.
2. Repairs have been negotiated, and your loan has been approved and confirmed.
3. As a buyer, you will release your contingencies.
4. Agreed-upon repairs will be scheduled.

Week Four:

1. All repairs are completed
2. You will do a final walk-through to verify that the repairs have been done and that the home is in the same condition as when you made the offer.
3. Be sure to discuss the inspection strategy with your real estate agent as the market and its tolerance for inspections and repairs can vary greatly.

Congratulations on your new home!

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Negotiations

Even when your purchase offer has already been accepted, you may want to negotiate the price to reflect the cost of any necessary repairs revealed by inspections. You could also keep the purchase price the same, but try to get the seller to pay for repairs. Even if you’re purchasing the property “as is,” there is no harm in asking. You can also still back out without penalty if a major problem is found that the seller can’t or won’t fix.

Negotiating these following inspections, the buyer could submit a Request for Repairs, which will either ask the seller to repair an issue or give a credit based on the findings of their inspection. Once a decision has been made, the buyer signs the inspection results, thus removing their inspection contingency. At this point, the buyer cannot pull out of the transaction without losing the deposit, unless the home does not appraise or the buyer cannot get a loan. The seller has the option of agreeing to the repairs or they may negotiate the price down to compensate for needed repairs.

If the buyer’s offer includes an appraisal contingency, an appraiser will come out to the property. As a standard of California law, every home must be properly fitted with smoke detectors, and carbon monoxide detectors and the water heater must be double strapped. The appraiser will check for this. During this visit, they will be taking notes on the property, measuring square footage, and lot size to ensure it matches the tax assessor’s information.

Stipulations

You most likely deposited earnest money when you signed the purchase agreement. Earnest money is a deposit made to a seller indicating the buyer’s good faith, seriousness, and genuine interest in the property transaction. If the buyer backs out, the earnest money goes to the seller as compensation. If the seller backs out, the money is returned to the buyer.

To complete your purchase, you’ll have to deposit additional funds into escrow. As the original earnest money is generally applied to the down payment, it is crucial to arrange for the various other required payments before the deal is closed. Failure to do so can lead to the sale getting canceled, with the earnest money going to the seller. Furthermore, you could still be charged for the various services you used before the deal fell apart.

Final Walk-Through

One of the last steps before you sign your closing papers should be to look over the property one last time. You want to make sure that no damage has occurred since your last home inspection. You should also verify that the seller has completed the required fixes and no new problems came up.

At this point, you probably won’t be able to back out unless the home has sustained serious damage. However, it’s not unheard of for a petty buyer to pressure his or her agent to get the agreement nullified over something insignificant.

• Read HUD-1 Form Carefully – at least one day before closing, you will receive a HUD-1 form or the final statement of loan terms and closing costs. Paperwork is critical to closing a property deal. Despite there being a stack of papers filled with complex legal terms and jargon, you should read all of it yourself. If you don’t understand something, consult a real estate attorney. Also, our specialized Realtor Erik Brown will help you in making sense of any complex legal language. Although you may feel pressured by the people who are waiting for you to sign your papers—such as the notary or the mortgage lender—read each page carefully, as the fine print can have a major impact for years to come. In particular, make sure the interest rate is correct and all other agreed terms are mentioned. More generally, compare your closing costs to the good faith estimate you received at the beginning of the process. Vigorously dispute any fees you think are illegitimate. Finally, check to see that nothing included in the purchase agreement was removed.

Closing

Unless you’re buying your house with a giant pile of gold, expect at least a month to close. Key Closing Documents:

• Closing Disclosure (or HUD-1 and TIL in some cases) – a summary of loan terms, monthly payments, and closing costs.
• Promissory Note – as it sounds, it’s the promise that you’ll repay the loan. It shows the loan amount and terms of the loan and the lender’s recourse if you fail to make payments.
• Deed of Trust – secures the note above and gives the lender a claim against the home if you fail to live up to the terms.
• Certificate of Occupancy – if the house is newly constructed, this is the legal document you will need to move in.

(Cash is always the fastest way to close, FYI!) “If you’re using a government-assisted mortgage program, like FHA, VA, USDA, FHA 203(k),” you’re usually looking at around six to eight weeks, depending on the processing time. But before you close, do your homework—whether that means reading your HOA (Homeowner’s Association) documents or brushing up on the town codes. These will clue you into the local by-laws and community policies you need to be aware of so you don’t find out six months in that you were not allowed to paint your house that color or park your car in your driveway. So, read them.

At closing, which is an in-person event involving you, the seller, agents, and lawyers, all the paperwork (including loan docs) will be signed. Within a few days of your lender receiving those docs, a check will be delivered to the seller. Did you save that Champagne? Now’s the time to pop it—you just bought your house.

Though it may seem like the closing process is a lot of work, it is worth the time and effort to get things right instead of hurrying up and signing a deal you don’t understand. Be wary of any pressure to close the deal fast.

Erik Brown is a Realtor that can help you with any transaction, especially when you are putting so much money, time, and attention on the line. It’s a good idea to have a Beverly Hills realtor beside you to have what’s going on so you won’t get taken advantage of.

Erik Brown (email to: erik@erikrbrown.com) has extensive experience working with all kinds of buyers in Beverly Hills REALTOR & Luxury Home Specialist

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