Escrow is a necessary but often painful part of buying an investment property. During escrow, the house inspections are done, the mortgage is secured, and the paperwork is handled. There’s a lot of activity going on all at once, and it becomes a juggling act to get everything accomplished correctly and on time. Here are five tips to make escrow easier when you purchase a property.
Draw up a calendar
With so many activities happening simultaneously, some of them depending on the completion of a prior activity, it’s hard to keep all the details straight in your mind. Make sure you don’t forget anything or miss any crucial cutoff dates by putting together a calendar of tasks and timelines. That way you can always see the big picture and refer to it as often as needed. The calendar will help keep you on schedule and in control, so you can avoid costly mistakes and missed deadlines.
Get mortgage preapproval
A mortgage broker can use his or her associations with different lenders to find you the best rates and conditions. This can be done even before you put submit an offer for a house. At the same time the broker can get you a preapproval letter, which confirms that you qualify for a loan. The preapproval letter will save you time and trouble when you go to secure your mortgage. Be sure to have ready all the documents that you’ll need (bank statements, records, pay stubs).
Get property insurance immediately
You must make sure the property is insurable before escrow. Then as soon as escrow is opened, start looking for an insurance policy. This gives you time to shop around and compare prices. See if you can get a package deal for auto and homeowner policies. Most lenders expect proof that you have property insurance before they will issue the mortgage, so don’t put off this task.
Prepare for the house inspection
Obtain a disclosure statement, a permit history, and a plot map before the house inspection. Most states require the seller to prepare a statement disclosing all known problems with the house. This includes any needed repairs, environmental problems (e.g. radon or lead paint), problems with neighbors, any major crimes committed in the house, and so on. The list of problems will provide an idea of what to look for during the house inspection. The information can also give you leverage to negotiate concessions from the seller.
If there were any room additions or major repairs, you will want to know if they were done with a permit, by a professional. The permit history will tell you about approved and unapproved permits. This is useful information for both you and the house inspector. Any renovations not up to code can be costly situations to remedy. Finally, the plot map is to confirm the property lines. They might not be where the seller thinks they are.
You, the buyer, are getting tasks done in a timely manner. But what about the seller? Stay in touch with the escrow company or agent to make sure that the seller is on schedule with his responsibilities, too.
Schedule the closing for a Wednesday or Thursday, rather than a Friday. Last-minute delays are common, so having an extra day or two will save you a frustrating wait over the weekend. On a related note, don’t count on taking possession the day of closing. Schedule any movers, contractors, etc. to arrive at least a couple of days after the closing date.