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An escrow account is a designated savings account into which funds get deposited for a specific purpose.
With respect to real estate and home loans, escrow accounts are used to pay real estate tax bills and homeowners insurance payments.
Escrow accounts are managed and disbursed by lenders.
When a homeowner “escrows” his mortgage, along with his scheduled monthly mortgage payment, he must also send an additional payment to the lender equal to 1/12 of the home’s annual real estate tax bill plus 1/12 of the annual homeowners insurance bill.
Due to the nature of insurance and taxes, both will go up over time and you will see notices from time to time that your payment will go up to cover these adjustments. There is generally 2 months worth of reserves in the escrow to cover any increases as they occur. By sending a pro rata portion of the tax and insurance bill each month, the homeowner’s escrow account will always, in theory, have enough funds to make payments in full as tax bills and insurance premiums come due.
Interesting study came out from the National Association of Realtors® that showed the benefits that buyers felt from using a Realtor®. The top 3 were:
- Helped them understand the process
- Pointed out unnoticed features and faults of property
- Negotiated better sales contract terms
While selling real estate in Phoenix for a number of years now, the number 1 reason that buyers call me is because they want me to help them find a home. What I find interesting is that it doesn’t match a single item in the study after the process is over. So I’m to assume that the reason a buyer calls an agent isn’t the biggest benefit they felt when the deal is done. Well, if the deal is done, the original reason for the call, to buy a home, was accomplished.
I also find it ironic that the top 3 items match what my clients say about me. I find it very important to educate my clients throughout the process. I don’t believe in keeping anyone in the dark and feel that the more the client knows, the better the decisions will be as we go.
I also have a history of being quick frank when walking through a property. The last thing I want to happen is for a client to buy a lemon, no one is happy when that happens.
When negotiating, there is such a fine line between being fair and being brutal. I don’t try to undercut the market, I’ve been down that road and all it means is a bunch of paperwork for so little success. Sure, 1 in 30 offers may lead to a good deal, but I find that 1 good deal is actually a lemon. So a good strong offer that is fair and justifiable will get the deal done and that goes back to the reason for the call, buying a house.
What happens around close of escrow?
In Arizona, our standard purchase contract says that a home buyer will sign their documents no later than 3 days prior to close of escrow. That means we need to sign papers several days before the agreed on closing date in the contract.
 Typically, we’ll walkthough the house a day or two before our signing appointment and make sure the house is in generally the same condition as when we wrote the offer and make sure repairs are all complete. On our signing day, you need to bring at least one form of government issued photo ID to the escrow office, along with a cashier’s check for the remainder of your closing costs and down payment. You can also wire these funds directly into the escrow account. And we get that amount needed usually a day or two before we come in to sign. Be prepared, you will be signing a lot of documents, this process on the best occasion takes 30 minutes, I usually plan 1 hour.
At the signing, you’ll review and sign all of your loan documents, review a final closing cost break down (called a HUD-1), sign the deed that transfers the property into your name, and various other documents.
And then you wait. If you haven’t transferred utilities, this is a good time to do that.
And then – on the day specified as close of escrow in your purchase contract, the lender releases the loan funds, and as soon as they hit the escrow office’s bank account, escrow will release the documents to be recorded.
And then once they are recorded, you own a home! In Phoenix, there is a morning and an afternoon recording. Generally the recording occurs in the afternoon. Once we know everything has recorded, you can get your keys.
I’ve worked with a number of Investors in the Phoenix Real Estate Market for a number of years. I can always tell those that know what they are doing versus those that are just getting into it. Those that have been doing it successfully for a while are talking specifics, price range, locations, rental rates. Basically, they’ve done their homework.
 On the other hand, there is the investor that is so new, they read a couple of books, probably attending a boot camp. They don’t talk in specifics at all, they talk in, I want 2 houses, I’m going to put in a bunch of low-ball offers and if any come back, we’ll look at the house, the numbers and if it doesn’t work, we’ll make up an excuse to get out of the deal. In other words they don’t negotiate in good faith. The waist a lot of peoples time in search of a good deal.
Often, when my phone rings and my inbox starts to fill up with investors looking to get hooked up while they are in town, I start to look at some of my ‘favorite’ investor trainers schedule to see who is offering a camp and know what type of ‘program’ the investors will be running before I get too far into the process.
Here is a settle hint, my long term, happy investors that have been doing this for a number of years.. they don’t shotgun offers, they know what they want and how much they are willing to pay for it. It works, and they make good money doing it. So when the shotgun stops working for you, consider using a plan that does.
In the Phoenix Real Estate market, just as any other market, if you don’t price the home correctly, all other marketing tactics will not change the outcome. If you need to sell quickly and you priced your come home correctly, what other things can be done?
Well, the answer is still going to start with price. It’s not a matter of being priced correctly, correctly can mean you’ll get your price in 90 days or 180 days, or in my home town 422 days. You need to price your property aggressively. What is the price that will sell the home in this market in the time you need to sell? But that is probably not what you meant when you asked the question. So let’s just assume you are aggressively priced and move from there.
If you have a great deal, than it’s time to let the world know. Also called marketing and exposure. Creating excitement in the market for the buyers to want to see and buy your home quickly. This can be done in many ways and first most, the MLS. Everyday, thousands of searches are running on the database to help buyers find homes that match their needs and wants. You want your home to show up in as many of those searches as you can, remember exposure.
Next up is letting those that are not necessarily in the market know about this great deal. I wasn’t in the market for a new Macintosh until my wife showed me a listing on Craig’s List for a mini that normally retails at $850 that was listed at $400. I’m all of a sudden in the market and in fact bought the computer. Sometimes a deal is so good you will get someone that wasn’t interested, well interested. Again exposure. You can do this in lots of ways, flyers, signs, Craig’s List, Twitter, Facebook, MySpace. You can even buy a billboard on the freeway near by.
Of course, if this all seems like a lot, well, it is a lot of work when you don’t do this as often as I do. I’ve got the systems and the plans lined up for several different situations and I’m sure I can help you get the job done. Just give me a call.
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