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FAQ's
A: An escrow is an arrangement in which a disinterested third party, called an "escrow holder" or "escrow agent", holds funds and in some cases legal documents, on behalf of a buyer and a seller, and distributes them according to the buyer and seller's instructions.
A: Individuals who are buying and selling real estate often will open an escrow for their protection and convenience. Escrow can be set up for the entire purchase price and any and all related legal documents, it can be set up to insure that certain requisite repairs are made after the closing or it can be set up for something as simple as an earnest money deposit. The Escrow Agent will disburse the funds and deliver the documents only upon the satisfaction of certain prerequisite and conditions. Both parties rely on the Escrow Agent to faithfully carry out their mutually consistent instructions relating to the transaction and to advise them if any of their instructions are not mutually consistent or cannot be carried out.
A: The Escrow Holder may be any disinterested third party (although some states, like Florida, require that certain escrow holders be licensed). There are two important reasons for selecting an established, independent escrow firm. One is that real estate transactions require a tremendous amount of technical experience and knowledge to proceed smoothly. The other is that the escrow agent will generally be responsible for safeguarding and properly distributing the escrowed funds. Escrow Agents are generally experienced and trained in real estate procedures, title insurance, taxes, deeds and insurance.
Q: What is meant by impartiality?
A: An escrow officer must remain completely impartial throughout the entire escrow process. He or she will normally adopt a courteous, rather formal manner when dealing with parties to the escrow, keeping conversation to the matters at hand in the escrow. This formal behavior is meant for the benefit of all concerned, since the escrow officer must be faced with issues of conflicting interest.
Q: What does the seller do in closing?
A: The seller deposits the executed deed conveying the property to the buyer with the closing agent. The seller also deposits evidence of pest inspection and any required repairs, as well as other required documents such as tax receipts, addresses of mortgage holders, insurance policies, equipment warranties or home warranty contracts, etc.
Q: What does the buyer do in closing?
A: The buyer fulfills any condition in the contract which are required to be completed prior to closing. The buyer also arranges for any requisite loans associated with the purchase of the property, any insurance required by the lender, and any inspection reports, surveys, title insurance commitments, etc called for in the purchase agreement.
Q: What does the lender do in closing?
A: If applicable the lender provides loan proceeds to the closing officer, and directs the loan officer on the conditions under which the loan funds can or may be used.
Q: What does the closing officer/escrow agent do in closing?
A: The closing officer opens the order for Title Insurance and obtains approvals from the buyer on title insurance report, pest, and other inspections. He/She then receives funds from the buyer and/or any lender, prorates insurance, taxes, rent, etc., and then disburses funds for title insurance, recordation fees, real estate commissions, lien clearance, etc. Next, a final statement is prepared for each party indicating the amounts to be disbursed for services and any further amounts necessary to close escrow. Lastly, the closing agent records deed and loan documents, and delivers the deed to the buyer, loan documents to the lender, and funds to the seller, thereby closing.
Q: How are division of charges handled?
A: The method of dividing the charges for the services performed by the closing officer varies from place to place. The fees and service charges to be divided might include, for example, the title insurance policy premium, escrow fee, and any transfer taxes, recordation fees and cost in connection with any loan being obtained. Unless there is some special agreement between the buyer and seller as to how these charges are to be aid, local custom will generally be followed in determining how these fees are divided.
