Escrow is a common practice used in real estate transactions. This is where a third party holds large amounts of money or property rights until one or both parties have met a specific condition. In real estate transactions, it’s common for this condition to be the fulfillment of a purchase agreement. Then upon the agreement’s fulfillment, the escrow manager will release the property or funds for a property’s taxes and homeowner’s insurance. Before putting anything in escrow, you need escrow management you can trust.
This third party has to have three things:
But the best real estate attorney to handle your escrow management is one who can help you establish your escrow in preparation for your transaction. The real estate attorneys at Tressler & Associates are perfect for what you need.
If you’re unsure whether you should or need an attorney to use the escrow process for your real estate purchase, consider the many steps that go into it. An escrow management attorney can help you understand and complete each step so that the property or funds you need for your purchase are available.
The first step that an attorney can help you complete is acquiring an escrow account. What kind of account and what holdings it can retain are all factors an attorney can guide you through. The account does not only contain purchasing funds but other items and finances such as:
Once you and the property seller agree on a price and sign your purchase agreement, we can open up an account. This part of the process does not drastically change whether you are purchasing a residential or commercial property. The main differences will likely be the amount of money being stored and extra documents to confirm the legality of the property and its uses.
In most cases, your lender will be your bank or another financial institution. They will also need assurances for the property to protect their financial interests in the case of foreclosure. If they believe it cannot be resold for the money they lent you, that could be a reason to not approve a purchase. This valuation process is called an appraisal.
If the appraisal comes in lower than the offered price, they’re likely not going to provide the funds unless you offer to pay for the cash difference or convince the seller to lower their price for the appraised amount.
There are options for changing the appraiser’s mind that an attorney’s help is instrumental with, including:
If all else fails, you can cancel the purchase agreement and dismantle the escrow account. This will allow you to search for another property to purchase.
By this point, your purchase agreement should be written and signed. It should already detail the property’s address and good faith estimates for:
Once this is finished, and you have your escrow account and lender’s approval, the last barrier that needs to be taken care of before you have secured financing is your financing contingencies.
Real estate agents place these on your purchase agreements to prevent buyers from owning two homes and paying two mortgages. They do this because if you already have a mortgage and you find you can only pay one, you won’t pay the one you have on the home they’re selling.
To deal with financing contingencies, you have to sell your current home within a specified amount of time. A real estate attorney can help you prepare all the papers and agreements you need to finish your property sale.
Rarely is a property perfect. It’s not uncommon to have a residential or commercial property violate a local ordinance or housing code. This doesn’t have to deter you from purchasing a property, but a seller has to disclose this information to you in a seller disclosure agreement.
You should always have an attorney look this over before you sign it so you can be properly informed of anything in it that may harm you. For instance, it is illegal in many counties to turn garages into living spaces. Before continuing with your purchase, you may want to require that the seller undo these changes before the sale goes through or plan to rectify the situation yourself.
Inspections are important for an assortment of reasons in regards to safety, true habitability, and legality. What inspections you need differ between residential and commercial properties.
Inspections are also not required by law in the state of Tennessee, but for the sake of your safety, financials, and living space, we recommend that you get one.
Insurance is necessary to finalize property purchases, but residential properties need homeowner’s insurance where commercial properties don’t. Homeowner’s insurance protects private residencies, and if the property is prone to flooding, you also need flood insurance. You need to get proper coverage from flood insurance to get homeowner’s insurance, which you need to get a mortgage.
During the process, you will also need title insurance to get a title report. Tennessee law does not require that you get title insurance, which protects you from issues with the deed and the property’s ownership documents. Most lenders still require it, though. This will protect you throughout the purchasing process, and even after if you find that a title issue was missed during the title search.
A HUD-1 form is one you receive at least a day before closing. It’s best to compare it to your good faith estimate with your attorney to make sure everything agreed upon is there. An attorney will make sure that you are not receiving any excessive fees and there are no mistakes in the document.
Escrow contains many essentials that you will need to purchase a new property. Without proper management, you can end up without the documents or funds you need to complete it. There’s no good reason to go into this purchasing process alone. With a real estate attorney, we can help you every step of the way, including through the escrow process.
Contact the attorneys at Tressler & Associates for help with your escrow management, and any other legal help you need during your real estate transaction.
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