What is an escrow?
When a contract is made by the seller of a property with the buyer of that property an escrow is frequently demanded. This occurs because the parties want to secure their investment. One of the ways they can ensure this is by inviting a neutral party to witness and keep the property’s document and the purchase contract. In the purchase contract is the instructions which the escrow agent is to follow to the letter. An escrow therefore, is a deposit of buyer’s funds that is meant for the purchase of the property, a deed or other relevant documents to be delivered to the appropriate person at the completion of a particular condition or event agreeable to the principals of the agreement.
Benefits of an escrow:
*It ensures that each party is secured in the contract.
*It ensures that each party fulfills it role that is, each party complete his task concerning that property.
*It ensures that no party can dupe another.
*It ensures the proper completion of the transaction.
*It ensures that the title deed is probably investigated and is cleared before passing it to the buyer.
What is an escrow instruction and what does it contain?
Before an escrow is opened, by an escrow company, some documents and a purchase contract are given to the escrow company. In the contract of purchase there is an instruction agreed to by both principals. This instruction is an information of what should be done before the closing of the deal. The escrow agent therefore ensures that those instructions were carried out to the details. The escrow instructions contain contingencies for home instructions, flood insurance, financing, repairs, home inspections, date of closing, date to exit the property if presently occupied, and other tasks which the escrow company ensures done. As soon as one task is done the buyer or seller informs the other party by a release form or mail.
Parties to the escrow:
The parties to the escrow are buyer, seller and lender.
How does it work?
Once an escrow company is chosen, and the instructions are handed to the agent, he commences work immediately. He opens an account where he deposits both the fund and the documents involved for the principals or the parties. He follows the instructions given in the contract of purchase to the letter. And he does this in a timely manner, meeting the deadline for the closing. He also handles the funds and also pays bills as instructed by the principals. He ensures that the contract and the escrow are only closed when all parties are well settled.
An escrow company will charge commensurate to the amount of cost incurred by it, the liabilities the company is exposed to, as well as the profit factor. However the fees can differ from county to county.