Once you and the seller agree on a price and sign a mutually acceptable purchase agreement, your real estate agent will collect your earnest money—sort of like a good faith deposit which is ultimately applied to your down payment—and deposit it in an escrow account at the escrow company or service specified in the purchase agreement. An escrow account is managed by an outside party in order to hold valuables, such as money, property deeds, and personal finance documents, on behalf of two agreeing parties until specified conditions are met during a financial transaction. Depending on the reason for escrow, the escrow agent may be a title company that specializes in real estate, a bank or other financial institution, or an Arizona Escrow Company officer entrusted with the role.

The escrow company acts as a neutral third party to collect the required funds and documents involved in the closing process including the initial earnest money check, the loan documents, and the signed deed. In some areas, attorneys may handle this process instead of an escrow company, in which case it’s often called “settlement” rather than “escrow.”

Your other options to try to change the appraiser’s mind are one of the following:

• Provide additional information on why you believe the home should be appraised at a higher amount.
• Get a second appraisal.
• Try going with another lender and hope that appraisal comes out in your favor. If none of these options is possible, you will be able to cancel the purchase contract.

Agents often also include home sale contingencies in purchase contracts to prevent buyers from simultaneously owning two homes and paying two mortgages. This type of contingency gives a buyer a specified amount of time in which to sell his current home before closing escrow on a new home.

Notably, you cannot negotiate any seller concessions here if the contract says you will purchase the property “as is.” If the inspection process concludes satisfactorily, you will then need to remove the purchase agreement’s inspection contingency in writing. You’ll repeat this step after any other inspections.

Pest Inspection
If the lender does not require a pest inspection, you may still want to get one to ensure the house does not have termites, carpenter ants, or other pests such as roaches or rats. These problems may not be apparent during the daytime hours when you’ve most likely viewed the house and would be a terribly unwelcome discovery after you move in. If there are any pest problems, they will need to be rectified before the sale can proceed—assuming that you want to continue with the purchase. This is another area where you may want to renegotiate with the seller to pay for the work.

Environmental Inspection
It is sometimes recommended to get an environmental inspection to check for toxins in the home such as mold and asbestos. There can also be problems on the home site, like contamination from a location near a landfill, former oil field, dry cleaner, or gas station. Any problems uncovered in this area can mean serious health hazards and may be prohibitively expensive to fix.

Other Inspections
Areas subject to earthquakes may require a soil report and/or a geologic report to assess the risk of serious damage to the property in the event of such a disaster. Many areas require flood reports. If the home is too likely to flood, you won’t be able to get homeowner’s insurance, which means you can’t get a mortgage. In some cases, purchasing flood insurance in addition to your homeowner’s insurance will solve this problem. In rural areas, a land survey should be done to verify the boundaries of the property—in urban areas, the boundaries tend to already be very clear.

This includes homeowner’s insurance and any extra coverage required in your geographic area such as flood insurance. You will be required to have homeowner’s insurance until your mortgage is paid off—and you’d probably want it, anyway. Choose your own insurance company, which may be different than the one the lender selects, and shop around to get the best rate.

These are also required by your lender, but again, you’d want them anyway. The title report makes sure the title to the property is clear—that is, that there are no liens on the property and no one else but the seller has a claim to any part of it. Title insurance protects you and the lender from any legal challenges that could arise later if something didn’t show up during the title search. If there is anything wrong with the title—known as a cloud or defect—the seller will need to fix it so the sale can proceed or let you walk away. Depending on where you live, the escrow company and the title company may be one and the same.

It’s a good idea to re-inspect the property just before closing to make sure no new damage has occurred and that the seller has left you items specified in the purchase agreement such as appliances or fixtures. At this point in the process, you probably won’t be able to back out unless the home has sustained serious damage. However, it’s not unheard of for a petty buyer to pressure his or her agent to get the agreement nullified over something insignificant.

At least one day before closing, you will receive a HUD-1 form or the final statement of loan terms and closing costs. Compare it to the good faith estimate you signed earlier. The two documents should be very similar. Look for unnecessary, unexpected or excessive fees as well as outright mistakes.