What Is Escrow - Information and Advice
"What is Escrow? Title escrow company process
explained."
The Escrow Process
Both buyer and seller deserve the assurance that no funds or property will
change hands until all of the instructions in the Purchase Contract have been
satisfied. Buyers and sellers submit signed documents and buyer’s deposit money
to be held by an independent neutral third party (Escrow).
After the conditions agreed upon by both buyer and seller (in the Purchase
Contract) are satisfied, Escrow then distributes the documents and the funds.
The escrow holder is an independent neutral third party; works for both the
buyer and the seller, and is authorized to follow the specific written
instructions provided by both parties.
Escrow functions:
• Receives and deposits (into escrow’s account) buyer's initial deposit and
prepares escrow package. Requests "demands" (pay-off statements) from existing
lenders and/or lien holders.
• Obtains seller's notarized signature on grant deed.
Safeguards grant deed until all terms and conditions are met and buyer’s
remaining certified funds are on deposit.
• Orders title search and receives and
distributes preliminary title report. Calculates prorated amounts for
property taxes, rents, insurance, interest, and other expenses as required.
• Coordinates with buyer's lender throughout the escrow process. Orders and
processes buyer's loan documents. Coordinates buyer’s signing of loan documents
and their return to buyer’s lender. Receives buyer's final down payment funds
and coordinates funding with buyer's lender.
• Orders recordation of grant deed conveying title to buyer and distributes all
funds: pays-off existing loans; pays other required costs, such as termite
completion, home protection policy; etc.
• Releases net proceeds to seller.
Simultaneously, the buyer and the buyer's lender are engaged with the loan
approval process.
Lender duties:
• Orders a credit report and other credit documentation as required (mortgage
ratings, landlord ratings). Reviews the buyer's credit and when necessary
obtains satisfactory explanations from the buyer regarding any negative credit
history. Verifies the buyer's sources of income.
• Verifies that the buyer has
adequate liquid funds for down payment, closing costs, and reserves.
• Requests an
appraisal of the property, and verifies that the property's value is equal to
the contract sales price.
• Submits the loan to underwriters for final approval.
• Coordinates delivery of the buyer's loan documents to the escrow officer.
And in the meantime... While the escrow officer, lender, and buyer are
diligently working, the seller also has responsibilities.
Seller duties:
• The seller and the listing agent must now prepare detailed disclosures that
are required by law (smoke detector, lead based paint, earthquake, environmental
hazards, zone disclosures, water heater, transfer disclosure, etc.)
• Provide escrow officer information on existing loans to check against title
search findings.
• With their Realtor, make the home available for physical inspection and other
trades people as required by the purchase contract, such as licensed Termite
Company and lender's appraiser.
• Make any repairs agreed upon in purchase contract.
In order for your escrow to proceed smoothly, your Realtor’s job is to
coordinate and oversee the above chain of events.
Similar to dominos – each
event must occur in a timely fashion; delays in any event may result in the
postponement of escrow’s scheduled closing date.
Related Pages
Mortgage Terms
- Information on mortgage terms and what they mean in plain English - View
mortgage rates and learn home equity borrowing tips.
Real
Estate Agent - New Construction - Use a real estate agent to protect
your interests when your new home is also new construction.
Listing Agents Role
- The role of the real estate listing agent in selling your home - How using the
right listing agent will sell your home fast.
Seller Disclosure
- What needs to be included on the seller disclosure form - What to expect in
your home inspection and termite inspection.
Real
Estate Settlement Procedures - Your rights under the Real Estate
Settlement Procedures Act - What protections you are entitled to and what needs
to be disclosed to you.
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