Escrow is a term that homebuyers, sellers and real estate agents should be very familiar with and have a complete understanding of before buying or selling a home. How it applies to you is that third party hired to handle the property transaction, the exchange of money and any related documents.
Escrow comes into play once both parties have reached a mutual agreement or offer. There are many things that are handled by the escrow officer. The transfer of the buyer’s loan documents and property taxes, as well as working with the lender for the buyer to be sure that the title does not have any liens on it before the transfer of ownership is completed.
There are many forms to complete and instructions to follow during this process.
“Being in escrow” is a legal procedure that is used when real property requires a transfer of title. An escrow account is opened by the listing agent when the sellers of the property and the buyers of the property have come to an agreement on the selling price, the terms and any other contingencies that they may have and are ready to close the deal. The parties on both sides will sign all appropriate documents, and then escrow is ready to be opened.
Escrows do not need to remain open for a set period of time. A property can be in escrow for a long period of time or even just a few days. It depends on how complex and difficult the entire transaction is. After the escrow has been opened, the instructions for escrow are completed and need to be signed by all parties. These instructions will include the price of the purchase, the terms of the agreement, any inspections needed, possession agreements and any pertinent documents and disbursements.
At this time, the escrow officer will order a title report from a title company. This step ensures that there are no outstanding liens against the property. Outstanding liens could hold up the closing procedures. The next step is the closing of escrow.
This is when the escrow officer audits the files to be sure that all instructions have been followed and that everything is complete and looks correct.
Now a closing statement is prepared by the escrow holder.
The escrow officer’s next job is to order the title company to record the document and issue a policy of title insurance.
The final job of the escrow officer is to close the escrow.
The buyer and seller receive all closing documents, the money is distributed and all the paperwork is delivered to the correct parties. The seller of the property will receive the check for the sale of the property, and the buyer will receive the keys to the property they just purchased.
The escrow period can be a very confusing time for both the sellers and the buyers. It is imperative that everyone understand exactly what is happening and why. If you are confused by something, you should never be afraid to ask your real estate agent questions.