Frequently Asked Questions |
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What is escrow?
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Escrow
is a service which provides the public with a
means of protection in the handling of funds and/or
documents. Escrow enables the buyer and the seller
to transact business with each other through a
neutral party, thereby minimizing their risk.
In the escrow, all parties involved give their
instructions to this neutral intermediary, the
"escrow holder," whose duty it is to
assure that no funds or property will change hands
until all instructions have been carried to completion.
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What types of transactions go through escrow? |
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Most
contracts that involve the transfer, lease or
financing of real or personal property can be
placed in escrow. You may be involved in escrow
not only when you buy or sell a home, but also
when you buy a mobile home, sell a business or
transfer stock in a closely held business.
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Why do I need escrow? |
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Whether
you are the buyer or the seller, you want assurance
that no funds or property will change hands until
all of your instructions have been followed. With
the increasing complexity of business, law and
tax structures, it takes a trained professional
to supervise the transaction. |
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Who handles the escrow transaction? |
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The
escrow officer is a trained and experienced professional.
He or she can provide you with the assistance
required to close your transaction quickly and
effectively. This professional person may, under
the terms of the instructions, make the decision
that the conditions of escrow have been met, and
then order the transfer of the affected real or
personal property to the interested parties. |
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As a buyer entering into escrow, what must I do? |
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If
the transaction is contingent upon a new loan,
it is your responsibility to arrange this loan.
Your real estate agent can be most helpful in
obtaining a lender, since he or she is more knowledgeable
about which lenders are currently active and their
financing terms. |
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As a seller entering into escrow, what must I
do? |
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To
be fully prepared when you enter the transaction,
you should have sufficient information relative
to your ownership available. This would include
information concerning any loans, taxes, insurance
and, if appropriate, rental data. Items which
would be the sources of this information are your
original deed or title policy, fire insurance
policy and a year-end statement from the existing
lender. A copy of the most recent structural pest
control report may be helpful, or in some cases
even required, in a real estate transaction. .
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The instructions are ready -- now what? |
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When
the escrow instructions have been prepared, read
them carefully to determine that they are complete
and properly reflect your total agreement. If
you have any questions or corrections, discuss
them with the escrow holder before signing. Once
the instructions have been signed, they become
the basis for the conduct of the escrow. |
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Can I get legal advice from the escrow officer?
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An
escrow officer is not a legal counselor and cannot
give you advice. Remember, the purpose of escrow
is to take, and comply with, instructions to carry
out the mutual agreement of the principals. In
the event of disagreement of the parties, the
escrow officer must remain neutral until agreement
is reached. The transaction should not be negotiated
in the escrow office, nor should an escrow officer
become involved in the negotiation. |
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If I still have questions about the transaction,
where can I go for answers? |
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If
negotiations have been conducted through a real
estate agent, that person, or his/her broker,
should be your primary consultant. The role as
an independent agent prohibits the escrow officer
from answering many of your questions. However,
a knowledgeable escrow officer, whose responsibility
is giving impartial service to all the parties,
will refer you to the proper source for your answers.
An escrow officer will often suggest that the
customer seek the advice of legal counsel or a
tax consultant.
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What happens at the closing? |
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When
instructions of all parties to the escrow have
been carried out, the closing can take place.
All outstanding funds are collected at this time
and all costs must be paid. Title to the property,
whether real or personal, will then be transferred.
All specified documents are recorded or filed
at this time. |
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What fess must I pay at closing? |
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Fees
and charges are controlled by many factors and
depend largely upon the type of transaction and
the terms of your agreement. However, there are
certain charges which are considered to be normal.
(See Closing Costs) These would include fees charged
by a lender in connection with obtaining a new
loan or in paying off the old one. They may also
include recording fees, title insurance policy
premium, documentary transfer taxes, prepaid taxes
and insurance and escrow fees. Your escrow officer
will provide your with an itemized statement.
Your closing funds should be in the form of a
wire transfer or a cashier's check made payable
to the escrow holder in the amount requested.
Do not bring a personal check to close a transaction.
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The closing is complete--now what? |
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Upon
cosing, review the closing statement to determine
that the costs were allocated in accordance with
your instructions. It normally takes a period
of time after closing before the haard and title
insurance policies can be delivered to you. Any
recorded documents to which you are entitled will
be mailed to you after the escrow has closed.
Frequently these documents will come to you directly
from the office of the recorder or the Secretary
of State in the case of personal property fiing. |
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What if the transaction isn't completed? |
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Is
my deposit refundable? Who pays the fees? When
a transaction fails to close, a cancellation agreement
must be reached between the parties. This cancellation
agreement must be put in the form of a written
instruction, just as your contract was. Since
the deposit is part of the escrow contract, both
the buyer and the seller must mutually agree to
its disposition. Instructions for the disposition
of this deposit should include, among other things,
provisions for payment of charges incurred during
the escrow. This would include fees and costs
incurred by the escrow holder and charges such
as loan processing and title insurance fees as
specified in the escrow instructions. |
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