What is escrow?
“Escrow” means any transaction in which a neutral third party holds documents of ownership of either real or personal property for a buyer and seller. The buyer and seller provide instructions on the terms and requirements of the transaction to the neutral third party. When all the terms and requirements are met, the neutral third party transfers title to the buyer and the seller receives their funds.
Why Do I Need an Escrow?
Whether you are the buyer, seller, lender or borrower, you want the assurance that no funds or property will change hands until ALL of the instructions in the transaction have been followed. The escrow holder has the obligation to safeguard the funds and/or documents while the escrow is open, and to disburse funds and/or convey title only when all provisions of the escrow have been complied with.
What is the Escrow process?
The principals to the escrow–buyer, seller, lender, borrower–cause escrow instructions, most usually in writing, to be created, signed and delivered to the escrow officer. If a broker is involved, he/she will normally provide the escrow officer with the information necessary for the preparation of your escrow instructions and documents.
The escrow officer will process the escrow, in accordance with the escrow instructions, and when all conditions required in the escrow can be met, the escrow will be “closed.” Although the basics of an escrow are similar for every transaction, each escrow will be different in some respects, as it deals with your property and the transaction at hand.
The duties of an escrow holder include: following the instructions given by the principals and parties to the transaction in a timely manner; handling the funds and/or documents in accordance with the instruction; paying all bills as authorized; responding to authorized requests from the principals; closing the escrow only when all terms funds in accordance with instructions and provide an accounting for same–the Closing or Settlement Statement.
Who Chooses the Escrow?
The selection of the escrow holder is normally done by agreement between the principals. If a real estate broker is involved in the transaction, the broker may recommend an escrow holder. However, it is the right of the principals to use an escrow holder who is competent and who is experienced in handling the type of escrow at hand. There are laws that prohibit the payment of referral fees; this affords the consumer the best possible escrow services without any compromise caused by a person receiving a referral fee.