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Escrow What Is It and How Does It Work
Escrow What Is It And Why Do I Need It Escrow is a legal arrangement in which an asset (often money, but sometimes other property such as art, a deed of title, website, or software source code) is delivered to a third party (called an escrow agent) to be held in trust pending a contingency or the fulfillment of a condition or conditions in a contract such as payment of a purchase price. Upon that event occurring, the escrow agent will deliver the asset to the proper recipient; otherwise the escrow agent is bound by his or her fiduciary duty to maintain the escrow account.
Wikipedia
Basically, when buying a house the buyer, seller or real estate agent will initiate escrow. This will create a third unbiased party to act for all parties in the transaction in a fair and equal way. The escrow officer essentially acts as your secretary, enabling the transfer to take place with the few problems and in full satisfaction of the contract. It may not be necessary to have an escrow officer or another do this, but it will insure that all the paper work will be done correctly.
Why Should I Open Escrow? Perhaps the most important reason is "Concurrent performance", meaning that the grant deed is recorded on the same day that all loans, inspection fees, termite clearance and title fees have been paid. Escrow guarantees that your money is taken care of in a timely and legal fashion. Your real estate agent will likely know of a good escrow agent and can open escrow for both parties. No time should pass between the clearing of all debts and responsibilities of the buyer and seller and the recordation of ownership. Escrow is basically a clearing house for funds and documents to be sure that all the conditions of your real estate transaction are met before the property changes hands. All parties to the escrow have legal protection during the period of escrow minimizing the possibility of fraud or violation of any terms of the agreement. This is money well spent.
How Does an escrow Agent get Paid Just as real estate sales commissions are negotiable, so, too, is the responsibility for paying these fees. At some time before signing the purchase agreement, though, the buyer and seller ought to determine who will pay the fees. The fees is generally based on the size of the deal. All the paperwork involved in a real estate transaction can be very complicated and as we know it doesn’t take much to find yourself in a dispute over language or procedure. Save yourself the trouble and have a professional Escrow company, Bank Trust Dept., S&L or Attorney do the work with the experience and deep pockets insurance will provide, rather than take it on yourself. Part Two of this discussion will look at how it works so that we can have a good sense of what we will need to do to have a successful and timely close.
Its a good idea to have an escrow agent to do the diligence involved in a dispute free transaction. Transactions are so complicated that its helpful to have a basic understanding of process so that you can produce your end in a timely and hassle free manner. Escrow agent is basically functions as the secretary for both parties in the transaction. The escrow agent can be a Bank or S&L, a mortgage company or an attorney. Just be sure they are experienced and they have proper, current insurance to protect all parties in case of error or fraud
What They Do
The Preliminary Report: The escrow agent will order the preliminary report. This is the first step before a title insurance policy is issued or when escrow is opened. A preliminary report (sometimes referred to policy of title insurance) reports only on those documents having an affect on the title.Beneficiary Statements: The escrow agent will ask for all documents regarding existing loans and mortgages from all lenders. Liens: The agent will call up all documents necessary to clear all liens (debts) against the property New Loan: Obtain all documents and instructions necessary for the new loan. Here the escrow agent will get all that’s needed to facilitate the buyers new loan for the property. Trust Account: The escrow agent will open and deposit all funds into a trust account and collect and issue all receipts for monies coming and going. Its third party record keeping for the entire transaction. Money is never handled by either of the transacting parties, keeping disputes and fraud to a minimum. Taxes: prorates all taxes, rent and interest Manage all Documents: Keep all documents safe and properly executed so that the transaction can close on time and complete. 8. Title Insurance: Obtain the title insurance and be sure that the fire insurance is in place Record all Documents: such as grant deeds and disburse all money when the deal is complete Generally the first step is to have your real estate agent open escrow (although any party can do this). The escrow agent will order the preliminary report. Sometimes deals will end here. The title search will determine whether the current owner actually has legal ownership and right to sell. The report will uncover defects of the title. If all is well with the property the next step the escrow agent takes is to examine the parcel maps and surveys to report every open easement and right-of-way, such as liens, judgments, assignments, and powers of attorney. This information shows her what items, if any, must be cleared up in order for the title to be conveyed from the seller. You should pay careful attention to easements, since they may encumber the land just where you want to put the swimming pool or that extra bedroom. If all is good the escrow agent will shop for the loan and prepare the application. An escrow trust account is then opened and all money transactions are deposited here for both parties in a completely transparent way for all parties to see. The escrow agent will prepare escrow instructions and be sure that all conditions are met before closing escrow. At the close of escrow all documents are recorded, all old debts are paid off, the grant deed is delivered and the deal is finalized. REsourced from www.yourpropertypath.com You may republish this article, as long as you do not edit and you agree to preserve all links to the author and www.yourpropertypath.com
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