What is an escrow?
Escrow: Generally referring to money that is held by the third party on behalf of transacting parties. It is an account separate from the mortgage where deposits of funds occur for payment with certain conditions applying to property taxes and insurance.
What does an escrow officer do?
An escrow officer is a neutral third party who holds funds passing between a buyer, seller or lender. Escrow companies are also commonly used in transferring high personal valuables and business properties.
What are escrow instructions?
Escrow Instructions: A document that sets the escrow officers duties, as well as the requirements of the parties and when a transaction is closed for an escrow.
What is the escrow process?
•Go into escrow/under contract and open an escrow account:
Once the parties have approved the contract, the escrow officer will become the overseer.
•Await the bank’s appraisal:
By providing the mortgage it will do its own review of the property, it protect financial interests in case a foreclosure occurs.
•Secure financing:
When the agreement has been managed, then it is negotiated and signed, up next is to take upon the loan commitment.
•Approve the seller’s disclosures:
In this part the obvious problems for the property should be mentioned, these complications should be properly taken care of by the buyer.
•Obtain the necessary inspections:
These inspections should be done: pest, housing and geological, the reason is to be sure everything is safe before buying or moving into a new place.
•Get hazard insurance:
This includes homeowners insurance and any extra coverage, this is so that in case of an emergency you’re insured, so get the best insurance for your security for extra protection.
•Acquire the title report and title insurance:
Title reports are made so that the property is clear, it is to verify that your property is under your name and no one else.
•Do a final walk-through:
It’s best to double check and inspect one last time to know that there is no cracks or any types of serious damage.
•Review the HUD-1 form:
A day ahead before closing an escrow, receiving HUD-1 form will happen it specifies the final base for closing costs and loan terms. Compare it with the estimation given earlier when the escrow had begun, check for any mistakes.
•Close escrow:
Time to sign all required documents, afterwards your escrow officer will clarify any questions, write a deed and notify the country recorder about the fact that you’re the property’s new owner. Also know that down payments and closing costs needs to be sent in a wire.
This concludes the procedure for the entire escrow process, it’s necessary to be aware of it all.
Who does what in the escrow process?
The Buyer:
•Deposits the funds required, in addition to any borrowed funds, to pay the purchase price with the escrow holder.
•Deposits funds sufficient for home and title insurance. Arranges for any borrowed funds to be delivered to the escrow holder.
•Deposits any deed of trust or mortgages necessary to secure loans.
•Approves any inspection reports, title insurance commitments, etc. called for by the purchase and sale agreements.
•Fulfills any other conditions specified in the escrow instructions.
The Seller:
• Deposits the executed deed to the buyer with escrow holder.
• Deposits evidence of pest inspection and any required repair work
• Deposits other required documents such as tax receipts, address of mortgage holder, insurance policies, equipment warranties or home warranty contracts, etc.
The Lender:
•Deposits proceeds of the loan to the purchaser.
•Directs the escrow holder on the conditions under which the loan funds may be used.
The Escrow Holder:
•Opens the order for title insurance.
•Obtains approvals from the buyer on title insurance report, pest and other inspections. Receives funds from the buyer and/or any lender. Prorates insurance, taxes, rent, etc.
•Disburses funds for title insurance, recordation fees, real estate commissions and lien clearance. Prepares a final statement for each party, indicating amounts to be disbursed for services and any further amounts necessary to close escrow.
• Records deed and loan documents, delivers the deed to the buyer, loan documents to the lender and funds to the seller, closing of escrow.
Glossary
Appraisal: the act of judging the value, condition, or importance.
Arrangement: the way that things or people are organized for an activity.
Balance: a state in which different things occur in equal or proper amounts.
Broker: a person who helps other people to reach agreements, to make deals.
Commitment: a promise to be loyal to someone or something.
Compelling: able to capture and hold your attention.
Coverage: the financial protection that is provided by an insurance policy.
Creditor: a person, bank, or company that lends money to someone.
Disclosure: the act of making something known or revealed.
Distribution: the way that something is divided or spread out.
Estimation: a judgment or opinion about amount or size.
Finance: the way in which money is used and handled by companies.
Hazard: source of danger or risky business.
HUD-1 Form: document for Department of Housing and Urban Development.
Identifies: to determine or know the position.
Inspection: The act of viewing closely to look for problems.
Instruction: a statement that describes how to do by the process of teaching.
Investment: the outlay of money usually for income or profit or for property purchase.
Involvement: to be associated or included for taking part in an activity.
Mortgage: a legal agreement in which a person loans money and returns in a few years.
Obligation: law or rule which a course of action for a debt of gratitude.
Overseer: a person who watches and directs the work of other people with precise.
Ownership: the state, relation, or fact of being an owner.
Procedure: a series of actions that are done in a certain way or order.
Proceed: to begin and carry on an action, process, or movement
Recorder: a judge in some courts of law who records properties.
Responsibility: a duty or task that you are required or expected to do.
Settlement: the act or process of settling an argument or disagreement.
Transaction: the act or process of doing business with another person, company.
Walk-through: a way of guidance to advance towards an outcome.