What is Escrow?
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. Escrow is a term that refers to a 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 issues before the transfer of ownership is completed.
An escrow account is opened when the seller and the buyer have come to an agreement on the selling price, the terms 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.
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,
- 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. This is when 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. This is when:
- the buyer and seller receive all closing documents,
- the money is distributed:
- The seller of the property will receive the check for the sale of the property,
- the buyer will receive the keys to the property they just purchased.
The escrow period can be a very confusing time, it is imperative that everyone understand exactly what is happening and why, so if any of this is confusing, as always, please feel free to give me a call and I can walk you through it (562) 900-5056