#23 Escrow: What Is It?



It’s a term that almost everyone has either heard of or has experienced as a process; but what – exactly -- does it mean?  What does it literally consist of?   How does one successfully arrive at the stage of “Escrow?”  What are the roles of each of your team participants when your home purchase transaction is at the point of opening Escrow?   What are the specific responsibilities implied by opening Escrow?

In a simple, random sampling, asking those questions brought interesting responses!    Some responses confirmed the suspicion that to many, the nuts and bolts of the Escrow stage of a home purchase are a little mysterious!   While definitely important, and clearly indicating nearing the end of the home purchase path, the actual details seemed vague to many.

In many ways, important aspects of your life have been in a kind of holding pattern – like a plane waiting for the tower to “OK“ the takeoff!  Entering the Escrow process sends the message:  Almost there!  ...but, how?

Escrow – managed by the Title company -- begins when your firm offer to purchase a specific home property is accepted by the Seller.    Previous to that event, your home purchase team has been guiding you through all the steps and stages that got you ready to actually follow through and buy a residential property.  From the moment you engaged with your home Loan expert to establish your financial qualifications, you were on the path to Escrow.    

With your Preliminary Approval in hand, you and your Residential Real Estate Agent (1) found the right home property, (2) moved through the necessary steps and investigations of that property, (3) made an offer to purchase, and then (4) the offer was accepted.   That’s when the process of Escrow starts.

Very specific actions are set in motion when your Escrow opens.   Your Lender orders an Appraisal.  You, the Buyer, order any Inspections you and your team have decided are relevant for the purchase.  (Those inspections are paid for separately by the Buyer, and are not part of the Loan funding.)

With Escrow “open” and under way, your Lender upgrades/updates your financial information to be sure that your financial picture is consistent with when you received your Preliminary Approval.  Any important changes must be taken into consideration, and may affect the loan status for your purchase.   One function of Escrow is to be sure the financial details are re-checked, are accurate and still appropriate.

As all the details and documents for your home purchase are double-checked and reviewed, the Escrow process moves your transaction forward for the finalizing signatures.   The important event that you have been working toward begins to reach conclusion!   You, as the Buyer, sign off on all of the Loan and Title documents.  (All signatures must be Notarized – which confirms that they are legitimate and have been witnessed.)

At this juncture during Escrow, all of the important crosschecked documentation goes to the Lender where the loan is again reviewed, and the Purchase is “funded.”   The funds are forwarded to the Title Company where the financial transaction and the new Title to the property are recorded. 

The final step in Escrow is the recording of the new Deed. Then, you are presented with the keys to your home and the Escrow process officially closes!

“Escrow” is a very specific review and authorization process.   Understanding the details of its critical role can help to remove the mystery.    It’s the stage in the process when an exacting re-check and examination of every previous preparatory detail leads to finalization and legal transfer of the residential property from Seller to Buyer!


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