Escrow is neutral 3rd party that completes certain tasks according to the written Escrow instructions given to them. In a real estate transaction it’s usually a deposit of funds by a buyer to the seller and a delivery of a deed by the seller to the buyer.
In a real estate transaction once a written contract is delivered to escrow, escrow will assign an escrow officer and an escrow number. The contract will contain written escrow instruction for the escrow officer to perform certain tasks. Once the tasks are completed the seller will receive funds and the buyer will receive title.
The buyer normally hands in earnest money or escrow check to escrow that upon a successful closing will go towards the buyers closing costs. The buyer may get the earnest money back if a contingency isn’t met like not being able to get financing or poor inspection results. Escrow will also provide a final settlement statement to the buyer before closing to let the buyer know how much money to bring to closing. Escrow will also make sure title is conveyed to the buyer.
For a seller the escrow officer will provide a settlement statement showing how much the seller will be receiving (Non Short Sale) and the breakdown of the fees associated with the transaction. Escrow will also make sure title is conveyed from the seller to the buyer.
A home buyer or seller needs assurance that no funds will be transferred until all instructions in the transaction has been followed. It protects the buyers’ funds and the sellers’ property.
In a normal real estate transaction the buyer and seller each pay ½ of the escrow charge.
Buyer or seller can choose escrow but normally since it’s the buyer’s cash, the buyer should be able to choose escrow.
Close of escrow is when all instructions have been satisfied and buyer and seller have signed the necessary paper work. The closing agent will disburse the funds and oversee the recording with the county. Once the recording numbers come back from the county then escrow is closed.
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