What is Escrow
In real estate we often throw the term
ESCROW around loosely:
"That house is in escrow" or
"This home fell out of escrow and is back on the market" but what is escrow,
An escrow is an agreement between a buyer
and a seller which directs a neutral third party to prepare and hold documents and funds
until the terms of the purchase agreement have been fulfilled by all parties to it.
The escrow holder impartially carries out
the written instructions provided by the principals. The escrow holder will not offer
legal or investment advice or help a buyer or seller negotiate obstacles in the
transaction. A good escrow officer can help your transaction move smoothly, and a poor one
can make a sometimes difficult process even more so.
Typically, the escrow will be opened by the
buyer's or seller's agent within a day of the final acceptance of the purchase contract.
Just how long an escrow lasts is negotiable (whatever length the purchase contract
stipulates) but is typically 30, 45 or 60 days. During escrow, the buyers inspect the
title and condition of the home and pursue financing as agreed upon between the parties
involved. After all the buyer's contingencies are satisfied and the loan is approved, the
lender delivers loan documents to the escrow officer, who then prepares all the additional
documents necessary to complete the sale. The escrow officer also orders the paperwork
needed for the seller to pay off any existing liens against the property so that clear
title can be passed to the buyer.
When all the instructions have been carried
out and outstanding funds have been collected, closing can take place. All fees, such as
title, termite company charges and commissions, are then paid and title to the property is
transferred under the terms of the escrow instructions. Escrow is "closed" after
title to the property passes from the owner to the purchaser. The escrow officer
accomplishes this by preparing and recording the Grant Deed, which is the document that
transfers title. Escrow fees are determined in the sales contract and will vary between
DUTIES THE ESCROW HOLDER PERFORMS:
Serves as communications liaison to all
parties in the transaction.
Prepares escrow instructions from the
purchase contract and delivers them to the buyer and seller.
Orders a title search to establish the
present condition of title.
Orders a statement of debt (the
"demand") from the current beneficiary, if any.
Prepares all deeds and documents related to
the transfer of title.
Receives and holds purchase funds from the
Instructs title to issue title insurance
Prorates taxes, interest, insurance and
other costs and fees and disburses payment from principal's funds as directed.
Records deeds and documents as instructed.
Prepares final statement (the
"settlement") for all parties, which accounts for the disposition of all funds
deposited in escrow.
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