CENTURY 21 Award Guide to the Escrow Process
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- 1. GUIDE TO THE ESCROW PROCESS
- 2. STEP 1: OPEN ESCROW Once a contract has been fully executed
and agreed upon by both parties, escrow can open. Typically, the
seller's agent will contact an Escrow Officer to secure an escrow
number for the transaction. TIP: Escrow company and officer are one
of the many terms of the contract that can be negotiated. STEP 2:
ESCROW INSTRUCTIONS The Escrow Officer will review the contract and
draw up escrow instructions. These instructions are then delivered
to the agents and their clients for signature and to verify that
they are error-free. These instructions essentially give the Escrow
Officer a roadmap of what to do and when to do it, as well as give
the Escrow Officer authority to act. If it has not already been
done by the listing agent, the Escrow Officer will also order a
real property title search with the designated Title Company. TIP:
It is possible to make a change to the escrow instructions, known
as an Escrow Amendment, but it must be agreed in writing by all
parties before the Escrow Officer can take any action outside the
original instructions. Be sure to look over your escrow
instructions line-by-line prior to signing!
- 3. STEP 3: FOLLOW THE CONTRACT The Escrow Officer will ensure
that everything in the contract is carried out. This may include
inspections, such as termite and home inspections, as well as
document collection. Documents collected may include: loan
documents, tax statements, fire and other insurance policies, title
insurance policies, terms of sale and any seller-assisted
financing, and requests for payment for various services to be paid
out of escrow funds. TIP: You will need lots of documentation for
many aspects of your real estate transaction. Be sure to have these
readily available so that you do not delay the transaction! STEP 4:
ACCOUNTING OF MONEY One of the primary purposes of an Escrow
Officer is to ensure that all money related to the transaction is
accounted for. During this part of the process, the Escrow Officer
will work with the seller and the lender to receive their funds, as
well as pay for any necessary services out of escrow. TIP: This
part of the process, also called "Funding", typically involves the
Escrow Officer, the mortgage broker and the lender.
- 4. STEP 5: CLOSING & RECORDING When all the conditions
required in the Escrow Instructions have been satisfied, the escrow
is complete! At this time, the Escrow Officer will release funds
and documents according to the instructions, pay all bills as
authorized, and prepare and deliver a final closing statement,
known as a HUD-1, to the parties. This statement is a final
accounting and itemized list of all charges and credits in
connection to the escrow account. Recording signifies that the
title company has released all the necessary documents to the
county where the property is located and they have been officially
Recorded. This typically occurs the following business day after
funding, however it is sometimes possible to record on the same
day. TIP: You can count on us for one-on-one guidance and
counseling throughout the escrow process!
- 5. WHO IS INVOLVED IN ESCROW? A real estate transaction
requires one or more buyers and one or more sellers. The
transacting parties will also typically have representation in the
form of real estate agents. The Escrow Officer is the neutral
third-party selected to carry out the escrow process according to
the timeline and process laid out in the Escrow Instructions. The
Title Officer is responsible for investigating titles to the real
estate and land prior to sale. Specifically, he or she is looking
for any irregularities that may affect the transaction or use of
the property, such as outstanding taxes, liens, easements or zoning
restrictions. If any issues are found, the title officer will
facilitate their research, assessment and resolution with the
transacting parties, government commissions, etc. Typically, the
title officer also facilitates the Recording of documents. This
involves going to the County Recorders Office to deliver all the
necessary paperwork and documentation for the transaction to be
Recorded. The underwriter never actually meets the buyer; his or
her role is to check over the figures of the loan, make sure all
paperwork is in order guidelines are met, and ultimately give final
loan approval. The lender is your singular contact for your home
loan, and will have been involved long before the escrow is opened.
During the escrow period, the lender works with the escrow officer
to facilitate loan funding before the closing.
- 6. TIPS FOR A SUCCESSFUL ESCROW BE PREPARED. You will be
expected to provide several pieces of information. Be sure to have
the following readily available: Correct spelling of your name and
current contact information Contact information for your lender
Fire Insurance Policy information Title Vesting Choice Copies of
Trust Documents (if applicable) REVIEW & UNDERSTAND BEFORE
SIGNING. Make sure to read and understand your escrow instructions
before signing them. Mistakes can happen! Once escrow instructions
have been executed by all parties, they cannot be deviated from
except in an Amendment, which will also need to be signed by all
parties. Especially make sure that your name, vesting information,
property address, important dates and any other terms &
conditions are reflected correctly. ASK FOR AN ESTIMATED HUD-1
UP-FRONT. The HUD-1 is the finalized itemization of all
expenditures and credits related to the escrow account. An
Estimated HUD-1 will give you an idea of closing costs and your
final down payment will look like, as well as give you time to get
financially prepared for the closing. This is a helpful tool for
you in determining escrow, title and other miscellaneous,
non-recurring charges, however be aware that it may not reflect
everything. TELL YOUR LENDER & ESCROW OFFICER ABOUT CREDITS.
You may be entitled to credits at the close of escrow, however
lenders typically have allowable thresholds when it comes to
money-back. Be sure that both your lender and your escrow officer
are aware of any credits that you are entitled to these should be
outlined in your contracts and included in the escrow
instructions.
- 7. TIPS FOR A SUCCESSFUL ESCROW REVIEW THE PRELIMINARY TITLE.
The preliminary title report can often shed light on whether the
transaction will be easy or difficult to process. Whether you are
the seller or buyer, it is a good idea to play an active role in
determining the title status. Free and Clear is a good thing!
Cloudy title reports signify that additional work must be done
before the property may be sold. This may include tax liens,
easements or other defects. COMMUNICATE REGULARLY. Communication is
key to a stress-free escrow. Be sure to keep in touch with the
necessary players, including: The escrow officer make sure they
have everything they need from you, including signatures and any
necessary documentation Your lender check on the status of your
loan frequently throughout the escrow process. Do not take any
actions that will change your financial situation, such as open a
new line of credit, but be sure to notify the necessary parties
immediately if something occurs that will affect the approval and
underwriting process. STICK TO THE TIMELINE. Throughout the escrow
process, you will be sent documents for signature such as
information request forms, title-related documents, copies of
reports and other disclosures that require written approval.
Delaying handling these documents can cause problems! Remember,
your escrow officer is on a strict timeline according to the escrow
instructions. Review and sign any documents as quickly as possible,
and do not hesitate to ask any questions whenever they might come
up.