After spending a couple of days with my first time home buyers recently they wanted to know what an escrow was. I had been rambling on and on about the offer and acceptance process and explaining what happens once a seller accepts the offer from the buyer, I just assumed they knew all the terms I was throwing at them. Because I am certain many who wonder about the escrow process in home purchasing, I thought I would explain it right here.
What is an Escrow? As it relates to real estate:
An escrow is the arrangement of a third party, in real estate the third party is the Title Company, who receives money and documents, a contract, for two or more parties in a transaction, the home buyer and the home seller.
The buyers and sellers of a particular property establish terms and conditions for the transfer of ownership of the property.
Property usually means land or a home, condo, apartment complex, etc. Once the terms and conditions are established, usually with a singed contract, they are given to a third party known as the escrow holder.
It is then the responsibility of the escrow holder to make sure all the terms and conditions are carried out. Terms are things like the selling price, important dates and deadlines that need to be met.
The escrow is an independent account and is the way in which the instructions of all parties, the buyers and the sellers in the transaction, are handled and completed.
How does the escrow process work?
Your Nevada real estate agent will start the escrow process as soon as the purchase agreement is signed by both buyers and sellers. Your agent will place your earnest money deposit into an escrow account with the closing title company. This will start the process and an escrow account will be opened.
The escrow account is a "trust account" that handles all the money involved with the transfer of property process. The escrow officer makes sure all property taxes are paid, all insurance premiums are paid, and that all sewer and trash bills are paid prior to closing.
During the escrow process, the escrow officer receives the home buyers earnest money deposit, checks to be sure there are no judgments or liens against the home seller and the property, forwards the deed to the title recording company and determines where the balance of funds it to be delivered.
The escrow holder acts for both the home buyer and home seller and protects the interests of each party,as per escrow instructions that are set forth in the written real estate contract. The home buyers lender instructions are taken into consideration during this time period. If there is a third party involved with selling the property, their requirements are handled with the escrow officer as well.
Once all terms and conditions are met and completed the escrow company provides a closing statement to all parties involved and the transaction is completed.
Who Chooses the Escrow Company?
Whether you are a buyer, seller, lender or borrower, you want the assurance that no funds will change hands or be mishandled until all of the instructions in the transaction have been followed.
You want to be make sure all requirements are met and that there are no outstanding balances of any kind left unpaid that could holp up the closing process.
You should be secure and conifendent that the escrow officer will complete all tasks prior to your closing date.
Choosing an experienced escrow officer is crucial in completing the home buying and home selling process. Your real estate agent can recommend an escrow holder for you if you do not know of one. Many real estate agents have escrow officers they trust and use more than others, but it is entirely up to the home seller or home buyer which one to trust and use for their home buying transaction.
I hope this blog helps to answer the questions about escrow and how it works. If there are any other questions about the Reno Real Estate Market, the home buying process, Reno Nevada neighborhood information, please don't hesitate to contact me. If you need a recommendation for a local escrow officer, loan officer or real estate agent, I would be happy to provide with you names and numbers.
First Time Reno Home Buyers Ask ~ What is An Escrow?