What is an Escrow?

• What is an Escrow?

An escrow is a system of document transfer in which documents and funds are entrusted to an impartial third party, the escrow closer, until all conditions in a contract are met. When the conditions are met, the escrow closer releases the entrusted documents and funds.

• Why Do I Need an Escrow?

An escrow assures all parties to a transaction that no funds are delivered and no documents are recorded until all conditions in the transaction have been met.

• How Do I Open an Escrow?

Opening an escrow is the first step in the closing process. Generally, to open an escrow, the parties to a transaction deliver to an escrow company the earnest money check and the purchase and sale agreement, which outlines the transaction and provides the closing date, contingencies and financing details. Anyone involved in a transaction can "open the escrow", but generally your real estate agent will do so. In the case of a for-sale-by-owner or FSBO, the buyer, the seller or both may open the escrow.

• Who Sets the Closing Date?

The buyer or seller may select the closing date, but both buyer and seller must agree to it. The purchase and sale agreement may state the closing date as "Closing to occur on or before August 20th, 2008." In most cases, closing occurs 30, 60 or 90 days from the date a purchase and sale agreement is signed.

• What Do Closing Costs Include?

The closing costs will include title search fees, taxes, notary fees, loan fees, escrow fees, recording fees, reconveyance fees, the real estate sales commission, and other miscellaneous charges.

• Who Chooses the Escrow Company?

The parties involved in the transaction decide which escrow company will close the transaction. Although it is very common for your real estate agent to recommend an escrow closer, the parties have the right to choose an escrow closer they feel is competent and experienced. The law prohibits escrow companies from paying referral fees to real estate agents, to protect the parties' right to select their own escrow closer.

Related Posts:

How Much Will I Need To Pay In Closing Costs?

 What is Title Insuracnce and Why Do I Need It?

What is Earnest Money and How Much Should I Offer?