What is an escrow?
Escrow is money, property, a deed, or a bond which is placed in the custody of a third party for delivery to the grantee only after specified conditions are fulfilled.
How does an escrow work?
The principals to the escrow or their agents first provide to an escrow officer a copy of the purchase contract, deposit, and any information necessary to prepare escrow instructions and supplemental escrow instructions. These instructions will reiterate the requirements in the purchase contract that the two parties have agreed upon. Upon review and execution by both the seller and buyer, the escrow holder then proceeds according to the instructions. Once all conditions set in the escrow instructions are met, the holder of the escrow records all necessary documents and closes the escrow. It is important to be clear and concise when instructing the agent and escrow holder, as the escrow is a neutral third party. The escrow holder can only operate based on the written instructions.
Who chooses an escrow and when?
Either the buyer or seller will choose the escrow company, and they often do so on the recommendation of their real estate agent, who may have a good working relationship with a certain escrow company. It is ultimately your choice as buyer or seller what company you choose for your escrow.
How do I prepare for escrow?
First, schedule a closing date ahead of time with the loan officer and escrow officer. Make sure to account for any trips out of town. Second, do not change jobs or take on additional debt before the closing happens. Your credit may need re-verified before closing. Third, make sure you have proper identification at the closing meeting. Identification can be a drivers license, state issued ID, or passport. Fourth, apply for homeowners insurance immediately. Finally, allow time for closing funds to clear the escrow trust account before the escrow closing meeting. Wire transfers normally happen within 6 hours, but checks will take longer.
What are closing costs?
Closing costs vary depending on the type of transaction. Escrow fees are based on the escrow's value, which may be calculated according to the sale price or loan amount. Fees can also vary depending on the complexity or additional services that may be required to facilitate the transaction. Other fees may include new loan financing charges, commissions, title fees, the payoff to existing lenders, or notary services. The escrow holder does not control fees charged by outside parties, and you do have the right to request a closing statement to review before closing the escrow.
What is a "refundable paid" on my estimated closing statement?
Items such as fees and interest may change daily, and the refundable paid line is used to avoid shortage when the escrow is closed. Any unused amount of the refundable paid will be given back at the transaction close.
Can the escrow company accept a personal check at closing?
The escrow holder must have a cashier's check or wired funds to close escrow promptly and to ensure that all funds are cleared before the close of escrow. Personal checks can be accepted, but it may take up to ten days for funds to clear, significantly delaying processing.
When can the seller expect to receive proceeds from the sale?
After all necessary documents have been recorded, the escrow holder waits for the wire transfer from the title company, which is usually received the next day. Upon receipt, the escrow holder will then balance the file and issue checks and closing statements.