Escrow Process and Final Settlement|
What is an Escrow?
Escrow is the deposit of documents and funds with a neutral third party with specific instructions as to how they should be disbursed.
Escrow acts as the clearing house for the exchange and distribution of those documents and funds in connection with transfer or financing of real property.
I always attend all client closings to verify the transaction closes as agreed and to help respond to any last minute unexpected glitches.
The escrow officer, an employee of the title insurance company will, acting as a neutral 3rd party, explain the documents and have you sign them. The officer will then assure completion of transaction by delivering to the lender for verification and document recheck and deliver to county for recordation of your deed.
Why is escrow important to me?
Escrow, or the services of a qualified escrow agent, assures all interested parties that the rules and regulations governing real property transfers will be strictly observed by a neutral third party with an objective interest in completing the transaction.
An escrow agent represents neither the seller nor the buyer. The escrow agent can act only on each party's behalf according to their written instructions.
What escrow services does the title company provide?
The basic definition of an escrow agent's responsibility is to accept and hold a deed from the seller in exchange for funds from the buyer. The escrow agent will concurrently, when all mutually agreed terms have been satisfied, release the funds to the seller and deed to the new buyer.
In most sale transactions, this 'simple' process requires the escrow agent to perform the following:
- Order a title report on the subject property and obtain all the necessary information to clear all title defects and satisfy existing liens and encumbrances against the property or the principals involved in the sale;
- Work with the buyer's lender to insure instructions from the seller, buyer and lender are coordinated;
- Prepare many of the documents necessary for the transaction and review all others to make certain they conform to the parties' demands;
- Figure tax and interest prorates and prepare closing instructions and statements for both buyer and seller;
- Arrange closing appointments for all parties to sign the necessary documents;
- After taking final signatures, the escrow agent has responsibility to complete the transaction by checking all documents for completeness, compliance and accuracy;
- Return copies of all loan documents to the lender for approval to record;
- Record all necessary documents in the county where the property is located. This is when the transaction is closed;
- Disburse all funds out of the escrow account according to the signed, written instructions. (These funds could include the seller's net proceeds, the Broker's real estate commission, and other payments required for loan approval or to satisfy other terms of the agreement.)
- Prepare and distribute final closing statements to all interested parties.
How much does an escrow cost and who pays for it?
In a typical sale transaction, the escrow fee is based on the purchase price. In Texas this fee is traditionally paid by the seller. Escrow fees are a negotiable item subject to agreement between the parties. If the sale transaction involves a federally guaranteed VA loan, the buyer is not allowed to pay any escrow fees and the entire amount will be paid by the seller.