Buying and selling property can be complicated and overwhelming with many parties involved and a lot of paperwork to cipher through. One of the most important elements of a Real Estate transaction is the Escrow. This is a valuable third-party, paid a one time fee, that holds money or property until there is a fulfillment of a purchase. Their role is to ensure the agreed upon terms of a purchase contract and mortgage agreement.
The Escrow company collects the Buyers earnest money deposit, down payment, loan origination fees, closing costs and other funds required to purchase a piece of property.
They then balance out the funds received by the Buyer with what is owed for title insurance, escrow expenses, commissions, HOA dues, taxes, mortgage payoff buyer credits and other expenses that are to be paid by the Seller with remaining proceeds being disbursed to the Seller after the County has recorded the transfer of title and the property has sold.
All funds for both Buyer and Seller are accounted for in a closing disclosure with an estimate provided prior to closing so all parties are aware of accounting.
In addition to handling the exchange of funds, the Escrow Company is responsible for obtaining necessary documents to complete the sale such as Seller’s mortgage payoff, HOA transfer documents, payoffs for any liens on title, loan documents, etc.
Even the most seasoned Buyers and Sellers know that using an Escrow Company is extremely beneficial in any real estate transaction.
The security of funds held as well as the assurance that in the event the transaction falls through funds are disbursed to the appropriate party. The purchase contract identifies who selects Escrow services and who pays their fees. In Southern California it is customary that the Seller gets to choose what Escrow Company they want to use and the Buyer and Seller each pay their own expenses.
Your Real Estate Broker is there to oversee Escrow on your behalf but understanding the various elements and parties to a Real Estate transaction will ensure you as the Buyer or Seller are more informed and comfortable when going through the process.
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