Escrow and Closing Costs
Congratulations! The seller has accepted your offer. Now what?
Everything is coordinated through an escrow company. It’s an independent third party where all the money goes while all the loose ends get tied up. Which company you use depends on who pays for it according to the contract. The fees are largely regulated by the state, so the cost between one company or another isn’t going to be that large. 
There are a few things that start right away.
- The deposit check gets cashed, so don’t be freaked out when your see your checking account statement.
- The title and escrow company (in northern California, where I work, title companies and escrow companies are the same thing) will begin to search through public records to make sure the seller actually owns the house, or they don’t have liens against it that they forgot to tell you about.
- The bank will begin to draw up loan documents. It may need some more paperwork from you, but the majority of the heavy lifting should be done already. For more, see my video on getting pre-approved.
- The bank will send out an appraiser. This person will give a value of the home that hopefully matches the price you and the seller agreed to. The bank wants to make sure they’re getting their money’s worth too.
- You and your agent should begin scheduling inspections. The first one you’ll want is a general home and a pest inspection. These are going to be between $300-$400 each.
Lets talk about other expenses. I think there is a lot of confusion about what you have to pay for upfront and what you have to bring to the table to close the deal. The upfront costs that you have to pay along the way are inspections and the appraisal.
- Inspections are about $300 each.
- The appraisal is $400 – $450.
Other costs which you may be hit with when the deal closes:
- Taxes: As a buyer, you will either pay these up front, or get a credit from the seller. It all depends on whether the seller has paid them already (usually this happens if you buy the home in the first half of the year).
- Reserves: Banks usually want to make sure you’ve got enough cash to cover your PITI (principle, interest, taxes and insurance) for about three months or more.
