Let's Talk Title and Escrow
Let's Talk: Title and Escrow
Escrow is an arrangement in which a neutral third party holds onto funds and key documents involved in a home sale, and then distributes them according to the agreement between the buyers and sellers. The escrow period begins when a seller accepts a buyer's offer, and ends at the closing table.
Have your earnest deposit money in an easily accessible account when home shopping. This will enable you to move fast on an offer if you find your perfect place.
Purchasing a house isn't like buying shoes; there's a lot of money involved, a lot of steps to manage, and a lot at stake. So the buyers and sellers don't exchange money and documents directly with one another. They do it through the escrow account.
Escrow ensures accountability. Buyers want to be sure all contingencies are met (inspection, title report, secured mortgage, etc.) before the sellers cash any checks. Sellers want to make sure they receive funds before they hand over the deed.
What happens during escrow?
An escrow account opens up when buyers put down earnest money to show the sellers that they’re serious about buying the home. An escrow officer – usually someone within a title company – is assigned to the account.
An escrow officer, or settlement agent, does the following:
• Holds funds and documents.
• Processes and facilitates the flow of documents and funds.
• Keeps all parties informed of progress.
• Responds to the lender's requirements.
• Secures a title insurance policy.
• Obtains approval of reports and documents from all parties.
• Prorates and adjusts insurance, taxes, rents, fees, etc.
• Records the deed and loan documents.
• Keeps track of and holds onto money owed and money deposited.
Escrow closes when all the tasks, documents and funds are performed or secured by the escrow officer.
What is my role in escrow?
Both buyers and sellers have responsibilities during the escrow process, and must do their respective parts to keep the transaction moving.
• Carry out all escrow instructions.
• Submit a down payment, plus any other funds required.
What is Title Insurance?
Title insurance is a policy that protects against financial loss stemming from problems found in a property's title, or legal ownership.
Think of it this way: As the buyer, how do you know the seller really owns the property? How can you be sure there are no liens, such as from unpaid taxes and lawsuits, or undisclosed heirs who might claim ownership? The answer lies in the title search.
A good title search generally turns up these types of issues. And a good title insurance policy will protect you should they arise during your ownership.
A real estate agent can answer your questions on title insurance and direct you to a title company. But at the same time, it's good to understand some of the basics.
Although you have the right to shop around for title insurance, most people follow the recommendation of their loan officer or real estate agent. One note: Because insurers generally follow the same pricing guidelines within each state, discounts can be elusive.
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