Here is a look at Escrow, prevalent in many real estate transactions.
What is Escrow? – It is a third party that takes posession of the funds and acts on the instructions of the parties to the deal, which is this case would be te buyer and seller of the real estate.
An escrow holder takes instructions from buyers, lenders, sellers and others. These instructions mete out the terms that govern the completion of the transaction. Most states only allow a licensed corporation or attorney to handle escrow, while in some areas, escrows and transaction settlements organizations are the same company that writes the title insurance. Escrow is useful to both the buyer and seller and helps to reduce the risk to both parties.
The escrow company, title company or attorney acts as:
– A guardian for funds and documents
– A clearing house for payments of all demands
– An agency to perform the clerical details between parties
A preliminary title report, issued by the title insurance company, lists out ownership details, land details, title defects and others details. The report will also show recorded limits, which are in a prior deed. It could also contain details of any covenants, conditions and restrictions (CC&Rs) contained in previous deeds. Such details could limit the use of the property.
This report issued by the title insurance company gives buyers the chance to question the seller on certain factors and request for the removal of any item disclosed in the preliminary title report that he finds objectionable prior to the purchase.
An escrow officer’s responsibilities include the following:
– Review preliminary report
– Provide copies of preliminary report to all parties
– Receive and prepare seller’s and buyer’s escrow instructions
– Receive buyer’s funds for escrow
– Arrange hazard insurance with buyer
– Comply with lender’s instructions
– Arrange new loan funding with lender
– Prepare documents and special instructions
– Record documents with county recorder
– Disburse monies and documents to appropriate parties
– Prepare final closing statements for buyers and sellers
– Issue title insurance policy.