How To Open Escrow
Once you have found the perfect home at had your offer accepted it is time to open escrow for the purchase.
The buyer and seller will agree to hire an escrow company (a neutral company that serves as a third party to ensure that all conditions of a real estate transaction are met).
Once the escrow company is determined in the contract, your agent will contact the escrow company and they will assign an escrow number. Once escrow is opened they will accept the deposit called “Earnest Money” (never send your deposit directly to the seller) and keeps your funds in a special bank account specifically for the transaction.
The escrow company is there to adhere to the terms of the contract and help guide you towards a successful closing.
Once escrow is opened, here is a step by step of a typical escrow:
- The escrow agent reviews the real property purchase contract to see the conditions.
- Performs a title search (inspection) of all recorded (public) documents verifying that the seller is the true owner and can sell the property to you. This is where any money owed to others regarding the property are discovered like prior mortgages (loans), liens, unpaid property tax or utility bills, even a marital divorce decree where the seller’s ex-spouse claims rights to part of the funds, are all recorded.
- Tracks and processes the funds and document including any loans you take out to purchase the property (mortgage).
- Communicates with your lender assuring everything runs smoothly.
- Regularly communicates with all parties (real estate agents, lender, seller and buyer).
- Makes sure that the seller has paid off all liens, property taxes, utilities, and other required payments making the property “free and clear” in order to sell.
- Meets with the buyer to make sure all loan documents are understood and signed.
- Gets the seller’s signature on the title deed and all other necessary documents.
- Records the title deed and all necessary documents by filing them with the government recording office.
- Disburses the funds as instructed in the purchase contract.
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