SANTA CRUZ (October 17, 2009) - There are innumerable details that must come together before the moment that the title to a home actually changes hands. This moment in time is referred to as the close of escrow. Escrow is opened at a title company once the buyer and the seller agree on the price, the terms and the timing of the sale. What happens between that moment and the moment the escrow closes is called the escrow period. During the escrow period the buyer will check out the condition of the property to determine if it will meet his or her needs and expectations. Sometimes this means getting another opinion from a friend, parent or sibling and it also often means hiring a professional home inspector to get a written and detailed report. It should be noted here that the appraisal that the lender will require should not be expected to take the place of a professional home inspection. In the standard purchase contract used by Realtors, the buyer agrees to purchase the home at an agreed upon price, in an agreed upon timeframe, providing several important steps occur. These usually include but are certainly not limited to (1) accepting the physical condition of the property and (2) obtaining financing. These are referred to as contingencies. While the standard purchase contract will state that the buyer has 21 days to release these contingencies, the number of days is certainly negotiable. Some sellers and Realtors like to see this contingency period reduced to, say, 10 – 14 days. This shortened timeframe is not impossible but puts a lot of pressure on all of those involved during the escrow period. Releasing the loan contingency is particularly challenging because the final loan approval does not actually occur until escrow closes. Even though the loan may have been seemingly ‘fully approved’ in advance, there are many last minute quality control checks that take place on the day before the lender writes the funding check and/or the actual day of funding. For example, the borrower’s employer will be called to be certain the borrower still has a job, a credit report will be updated to make sure no new debt has been incurred, the IRS will be contacted to ascertain the tax returns provided by the borrower are the same as those filed with the IRS, etc. A natural disaster can also affect the close of escrow. I remember in 1989 when we experienced the earthquake here, lenders cancelled all fundings until the properties could be reinspected for damage. The death of a buyer or seller will cause escrow to be cancelled. If the title company does a drive-by of the property and discovers construction in progress or if the title company finds a cloud on the title, the close of escrow could be suspended. In short, no celebration should take place until the title company confirms that the escrow has, indeed, closed!

This column is written every Saturday by Peter Boutell, Certified Mortgage Planner and a principal at Santa Cruz Home Finance. You may reach him at (831) 425-1250 of email him at Peter@SantaCruzHomeFinance.com.