What is escrow?
An escrow is an arrangement in which an impartial third party, known as the Escrow Holder, holds legal documents and funds on behalf of a Buyer and Seller, and distributes them according to the Buyer's and Seller's instructions.
Think of escrow as your middleman or the neutral zone between two parties during real estate transactions. An escrow company can hold deeds, bonds, money, or even a piece of property on behalf of the original owner and then release it once all obligations have been met by both parties. By hiring an escrow company, the buyer is required to put up the funds or whatever is being offered from his/her end, but the seller does not receive that money or property until the agreed-upon conditions have been met.
Who chooses the escrow company?
Selection of the escrow company is negotiable between the Buyer and Seller. Although, it is often the listing or selling broker that suggests a particular escrow company as they may have working relationships with various people or companies in the industry.
What does escrow do and who are the parties involved?
Escrow services aim to protect the interests of all parties involved in a particular real estate transaction. From the buyer's side, having an escrow account guarantees that you will actually get what you pay for and to ensure that the terms and conditions of the transaction are adhered to. Escrow agents are tasked with holding all critical documents and deposits and trained to manage the paperwork required to make the transaction legitimate and final. When all the terms and conditions have been met, the escrow agent will disburse the funds to the seller and the property deed or asset title to the buyer. To make the transaction official, the escrow agent will get the required paperwork recorded with the county and state so that the new property ownership is recognized by governing bodies.
Escrow holder has a number of duties in the transaction, but these are a few of the main things we do:
- Opens the order for title insurance.
- Obtains approvals from the Buyer on the Title Report, pest and other inspections.
- Receives funds from the Buyer and/or Lender.
- Prorates insurance, taxes, rents, etc.
- Disburses funds for title insurance, recording fees, real estate commissions, lien clearance, etc.
- Prepares a final statement for each party, indicating amounts to be disbursed for services and any further amounts necessary to close escrow.
- Provides necessary documents to Title company to record deeds.
Buyer(s) is/are the individual buying a piece of property. A few of their duties are:
- Deposits the funds required, in addition to any borrowed funds, to pay the purchase price with the Escrow Agent.
- Deposits funds sufficient for home and title insurance.
- Arranges for any borrowed funds to be delivered to the Escrow Agent.
- Deposits any deed of trust or mortgages necessary to secure loans.
- Approves any Inspection Reports, the Title Report for title insurance, etc. called for by the purchase and sale agreements.
- Fulfills any other conditions specified in the purchase and sale agreement.
Seller(s) is/are the individual selling a piece of property. A few of their duties are:
- Completes the executed deed to the Buyer with the Escrow Agent.
- Provide evidence of pest inspection and any required repair work.
- Deposits other required documents such as tax receipts, address of mortgage holders, insurance policies, equipment warranties or home warranty contacts, etc.
How long does an escrow take to close?
The length of time it takes for an escrow to close vary by case to case. Once all the terms and conditions of the instructions of both parties have been fulfilled, and all closing conditions satisfied, the escrow is closed and the safe and accurate transfer of property and money has been accomplished.