|
Convenience
Using the escrow holder
as a common depository, the buyer and the seller can proceed simultaneously in
providing funds, deeds, inspection reports, insurance information, and other
required documents. Both parties give written instructions, the requirements of
which must be met before the transaction is complete, to an experienced escrow
officer. Lenders also specify their conditions for completing the loan process.
Provided that the instructions are clear and mutually consistent, the escrow
officer, as a limited agent for all parties, saves time in the closing process.
Protection
The authority given to an
escrow holder is strictly limited by instructions provided by the buyer and
seller. The escrow officer is authorized by instructions to allocate funds for
items during the escrow period, such as real estate commissions, title
insurances, liens, recording fees, and other closing costs. Instructions also
specify the method of collecting funds, proration of insurance and taxes, and
time limitations on settling the transaction. The escrow process protects all
parties involved by retaining money and documents until mutual instructions are
met.
Confidentiality
Confidentiality is
another important aspect of escrow. To effectively handle a transaction, your
escrow officer must be instructed as to the required terms necessary to close.
The officer will discuss escrow matters only with the parties directly
involved, specifically, the buyer, seller, lender, and real estate agent. No
one else has access to this information, except through proper legal
procedures. The escrow officer retains impartiality and confidentiality
concerning the real estate process.
Closing Escrow
Upon closing, the
escrow holder causes the required documents to be recorded and disburses funds
according to the instructions given to the escrow officer. Escrow fees are
included in these costs, and are based on the sales price of the property, loan
amount, and services required.
Responsibilities of Each Party
The Buyer
- Pays funds to pay the purchase price, and funds for
property and closing costs.
- Provides deed of trust or mortgage needed to secure loan.
- Arranges for borrowed funds to be deposited into escrow.
- Provides, if required, documents such as inspection
reports, insurance policies and lien information to verify compliance to the
instructions.
The
Seller
- Deposits the deeds to the buyer with the escrow holder
when required.
- Provides evidence to meet the buyer's condition of sale,
such as proof of repair work and inspections.
- Submits other documents, such as tax receipts, mortgage
information, insurance policies, and warranties.
The Lender (When
Applicable)
- Deposits loan funds, lender instructions, and other loan
documents with the escrow holder.
The Escrow Holder
- Serves as a central depository for funds and documents.
- Obtains a title insurance policy, when required.
- Fulfills the lender's requirements if applicable.
- Secures approval from the buyer on requested documents.
- Prorates insurance, taxes, and rent, as instructed.
- Fulfills buyer and seller instructions.
- Allocates funds for closing costs, and verifies that
required funds from each party are deposited into escrow.
- Once all conditions are met, the escrow holder causes the
necessary documents to be recorded. Executed loan documents are forwarded to
the lender.
Back to Main Menu |