The Escrow Process
In a real estate transaction, escrow is an independent third party that holds important documents and funds. When opening escrow, the buyer and seller determine the terms and conditions for the transfer of ownership of the property via the purchase contract. Escrow ensures that all mutually agreed upon terms and conditions are met prior to the transfer of ownership and distribution of funds.
Escrow protects both you and the seller by managing the following tasks:
- Holding buyer’s good-faith deposit (typically 3% of the purchase price).
- Disclosing escrow and title fees to the buyer’s lender.
- Calculating prorated taxes and HOA fees.
- Providing a title report and title insurance.
- Ensuring that state and local transaction laws and rules are followed.
- Obtaining all necessary and notarized signatures from all parties.
- Ensuring the paperwork is legal and binding.
- Recording the transfer documents and insuring their accuracy.
- Receiving the down payment from the buyer.
- Receiving funds from the buyer’s lender.
- Paying liens, overdue tax, and HOA dues.
- Distributing proceeds to the seller.