1 What is escrow?
The average consumer usually cannot provide a clear definition of what escrow is or does. Even some real estate agents are not able to explain what is meant by escrow in concise words to their clients. So to make it simple we call escrow as trusted “middle man” who handles money or other assents, and document transferred between two parties, and distributes them according to instructions from both parties. When deal is ready to close escrow agent/ officer makes sure the money and papers wind up in the right hands. Escrow makes transactions flow smoothly and reliably.
2 What does it meant “to be in escrow”?
When you are in the process of buying a real estate, you are” in escrow” from the moment your offer is accepted by the property owner, your earnest money deposit is transferred into escrow trust account until you are done with due diligence and ready with funds to close a transaction, and take ownership of the property.
3 What is Earnest Money Deposit?
Earnest Money Deposit is the deposit made by buyer of the accepted offer. Earnest money deposit is held on escrow trust account during escrow period, and then being used by buyer as a part of down payment or funds for closing cost.
4 Who handles Disclosures?
Almost all disclosures are handled by the agents and principals outside of escrow. The escrow holder is not concerned with disclosures, and they are often not contained in any writing of the escrow instructions. The only disclosures that escrow is usually involved with are Zone Disclosure Statement, Natural Hazard Report, Area Disclosures.
5 What is Title Insurance?
Like any insurance vendor, a title insurance company insures against loss. Unlike many insurances company policies, a title policy is not a recurring expense. Once the premium is paid and policy is issued, the coverage is valid for as long as the same named insured owns the property. The one-time premium is paid through escrow. The title insurance covers past events that would affect ownership rights to the property, including items like: the estate or interest in a property, the recorded owner of the estate or interest, the legal description of the parcel of land involved, taxes (city & county), bonds and special assessments, such as street lighting, sewers, sidewalks, easements, such as public utility purposes, alleys, driveways, CC & Rs (covenants, Conditions, and Restrictions) that affect the use of the land.
All previous financial liens, such as bank loans, tax liens, special assessments, and mechanic’s liens, would be included. All previous financial liens against the seller would be cleared so that after closing of escrow no tax or court liens against the previous owner would remain against the property. Likewise, any financial liens against the buyer must be paid off and cleared before buyer may take the title of the property.