An offer has been accepted and a closing date
has been set. Now the home is going through escrow. But what does
that really mean to buyers and sellers? The following are answers to
some of the most commonly asked questions about escrow and the
escrow process.
What is escrow?
Escrow is a process that begins when the offer
papers are signed by both parties and ends when the loan is approved
and both the buyer and seller have fulfilled all the necessary
requirements.
What is an escrow holder?
The escrow holder is a neutral third party
agent of the principals—buyer, seller, lender, and borrower—which
helps with the transfer of ownership by ensuring that the terms of
the transaction are completed. This includes safeguarding all funds
(including the buyer's deposit) and documents. Once all the details
have been settled, the escrow holder disburses the funds and
documents to the appropriate parties.
What does the escrow have to do with items
that must be done to the property before it is sold?
The escrow holder keeps track of obligations
of the seller or buyer. For example, if the seller is required to
supply a termite inspection, the escrow holder would make sure it is
fulfilled before any funds are transferred to the seller. Findings
in the termite inspection report must be corrected on or before the
close of escrow. If the report calls for a plumber, roofer or other
contractor, the agent would advise the seller and get authorization
for work to be done.
How does the escrow company interact with
the title company?
The escrow holder receives a complete
ownership history of the property and any liens on record in the
preliminary title report. Anything that is out of the ordinary, such
as condo liens, judgments, etc., against the buyer and seller must
be clarified prior to close of escrow.
Why does the escrow process take so long?
The escrow process can be any number of days
depending on what is agreed upon between the buyer and the seller.
To assure a timely closing, you can check with the escrow holder on
specific items that will help move the process along. For example,
the buyer should do things like inform the escrow holder of the name
and phone number of his or her insurance agent as soon as possible.
The homeowners insurance policy needs to be ordered early, so
verification can be made with the lender. The lender will not fund a
new loan without a homeowners policy. If there is a delay, the
escrow process may be delayed. It also helps to make sure that the
funds provided are "good" because the escrow will only
close on cleared funds. You want to consider a more secure form of
payment, rather than a personal check, which can take up to a week
to process.
What happens with the check I give to the
escrow company?
Most buyers think that their check will not be
cashed until the close of escrow, but that is not the case. The
check is cashed by the escrow company immediately, and held in a
trust account. If anything out of the ordinary is to be done at the
close of escrow with the seller's proceeds, the escrow holder must
be notified. A signed amendment is required for wiring funds or
splitting proceeds.
If you have questions about the escrow
process, confer with your real estate professionals who can help
provide you with more detail with this or any other home buying or
selling subject..
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can be reached at (310) 265-2130
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