An escrow is a deposit of funds, a deed or other instrument by one party for the delivery to another party upon completion of a particular condition or event. Whether you are the buyer, seller, lender or borrower, you want the assurance that no funds or property will change hands until ALL of the instructions in the transaction have been followed. The escrow holder has the obligation to safeguard the funds and documents while they are in the possession of the escrow holder, and to disburse funds and convey title only when all provisions of the escrow have been complied with.
The escrow officer will process the escrow, in accordance with instructions and when all conditions required are met, the escrow will be "closed."
The key to any transaction is to read and understand your escrow instructions. Your escrow officer is not an attorney or tax expert so you should consult a lawyer or accountant for any advice. The escrow officer is there to follow the instructions given by the principals in the escrow.
Respond quickly to correspondence will assist in the timely closing of the transaction. If you are required to deliver funds into the escrow, make sure that you provide "good" funds in the form required by the escrow officer.
If you are obtaining a new loan, your escrow officer will be in touch with the lender who will forward their loan documents to escrow for signing. You should be aware that these papers are lender's documents and cannot be explained or interpreted by the escrow officer.
A closing statement is an accounting, in writing, which details the charges and credits of your account. The items shown on the statement will reflect the purchase price, the funds deposited or credited to your account, payoffs on existing encumbrances and liens, the costs for all services and a determination of the funds you are entitled to at the close of the escrow.
Your closing statement and all other escrow papers should be kept for income tax purposes. Your accountant will need the information about the sale or purchase of the property. IRS and other agencies may require you to prove your costs and or profit on the sale of any property.
The escrow holder has no control over the costs of other services that are obtained, such as the title insurance policy, the lender's charges, insurance and recording charges. Your escrow officer can provide you with an estimate of the escrow fees and costs as well as fees charged by others, provided such information is available.
Title Insurance is obtained when real property is purchased. The policy insures the owner or the lender of clear ownership of the property. The title policy is written after an extensive examination of the public record is made and the recording of the required documents.
The property taxes are prorated there will be an item in your closing statement that will reflect either a credit or charge to your account. Supplemental Property Taxes is another concern of the buyer. Upon transfer of real property, a supplemental tax bill is generated. It is your responsibility to ensure the proration amount is paid.
After the closing, the escrow agent records the deed and title transfer that make the home officially yours.