The word escrow can be confusing because it has several different meanings in real estate transactions. Even though many people don’t understand exactly what it is, escrow is a very important part of buying a home.
What is Escrow?
The actual definition of escrow is something of value. During a real estate transaction, the following items are given to an impartial third party to hold until specific conditions are met.
- Down payment check
- Documents
- Purchase and sales agreement
- Instructions
This third party can be an escrow agent, title agent, or a closing attorney. It is important to know that the third party does not have anything to gain or lose from the real estate transaction.
If you’re looking for a trusted escrow company in Long Beach, we recommend Anchor Seaport Escrow. They are independently owned and operated. They have been serving the real estate community for 35 years.
When You Open Escrow
A real estate agent opens an escrow account when a person, buyer, makes an offer on a house. The buyer writes a deposit check and the money is given to the impartial third party. Today, it is very common for the buyer to wire the funds to the escrow company. A lender can also open an escrow account. It is known as a reserve or impound.
If a borrower or purchaser obtains a loan with less than 20% down for their house, then the lender will require an escrow account. The lender will add the combined total amount for the annual property taxes and home insurance to the monthly mortgage payments. The lender then pays the property taxes and home insurance for the homeowner.
Responsibilities of Person Managing Escrow:
- Collect all paperwork and money from buyers, sellers, agents, and lenders
- Arrange title search
- Give each party detailed closing instructions
- Schedule closing meeting
- Distribute all funds
- Ensure that all transactions are recorded at the county
When You Close Escrow
Once the buyer and seller have signed all paperwork and all funds have been paid, the closing agent distributes all funds. The closing agent also coordinates with the title company to record all documents with the county recorder. When the deed is filed at the county, then the title to the house is transferred to the new owners. When all transactions are completed then the escrow is closed. Final closing statements will then be mailed to both the buyer and seller.
Why is Escrow an Important Part of a Real Estate Transaction?
Escrow protects all parties involved in a real estate transaction. It confirms that funds or properties do not change hands until all conditions in the agreement have been met.
If you have questions about any of your real estate transactions please fill out the form below.
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