Tuesday, November 13, 2007

What to Expect During Escrow

The escrow process is a mystery to many real estate consumers, especially first time home buyers. What happens during this period, and what should you expect? If everything in the transaction goes according to plan, it should be smooth and seamless. But, as they say, always expect the unexpected.

The escrow process is basically taking this very complicated financial transaction involving large sums of money and property and then putting it into the hands of a neutral third party. When a buyer makes a purchase offer in California, the standard purchase offer form is also a set of escrow instructions. If the seller agrees with all of the details, he or she signs the contract, and an escrow account is opened at the mutually-agreed upon escrow company (such as Placer Title).

The escrow officer gathers all the documentation from both sides of the transaction, plus the buyer's deposit check. This check is deposited in an escrow account, and all sides must agree before the money in the account is transferred. That is one reason why an impartial third party is so important.

Another role that the escrow officer takes is making sure the buyer's financing paperwork and the seller's loan payoff information is all in order. Then they will prepare all the necessary documents and closing statements needed to transfer the property from the seller to the buyer. This also includes handling any title paperwork with the city and county, as well as arranging title insurance.

Sometimes disagreements arise during the escrow process, and the escrow officer is there to facilitate getting all parties in agreement. Sometimes the contract and paperwork needs to be amended. But, sometimes, an agreement cannot be reached and the transaction is cancelled; in which case, the escrow officer will oversee the transfer of any monies in the escrow account.

This is just a simple overview of the escrow process, and there are many more aspects to it than this. Of course, it can also become complicated and sticky, but we are always thankful when it works out smoothly. If you have questions on the escrow process and how to make it go as easily as possible, just let me know. I'm always happy to help. I can be reached at 510-547-5970 x57 or MSmartt@jps.net.


Title Closing said...

The escrow process is a crucial financial transaction. Imagine your money was in a third party person. Escrow officer really plays an important role on every aspect from the simple payment upto signing the contract

Anonymous said...

This is my story. The broker originally pre-approved me for $350K. I went shopping. I found a townhouse I wanted and again the broker approved me now for $357K. We never discussed my bottom-line budget concerns or loan options, but she said because I had a FICO score 800 and 3% ready to put down I didn't need to be concerned about these questions until escrow began. She said I was good to go to finance. Next, I had the house inspected. No problems. However, during the inspection I also signed the seller's realtor's disclosure forms and request to open escrow. She prepared a document that I signed which required the seller to pay all closing costs. The forms were paraphrased and I never read them. I also asked the seller's realtor for the townhome's HOA bylaws before the escrow began and she said the seller was not required to give them to me until escrow began. She also said she had 20 days to provide the documentation after escrow opened. I did not know the bottom-line costs of the mortgage or the escrow process or the law. My realtor was with me at the time. I was starting to feel very uncomfortable. Both realtors were very pushy. The following week my realtor and broker asked me to prepare a check for $2000 to give to the escrow company to begin closing costs. I was uncertain how much of the closing costs did I get to opt out of, however, escrow began. As I said before, the agreement according to my realtor and seller's realtor that all closing costs were to be paid for by the seller. However, I never saw an official form from my broker outlining the loan terms or requirements, or closing costs. I didn't even know who the lender was, but the broker assured me orally that this information wasn't important until escrow began. I asked the broker to see my accountant to discuss my budget. She said I better hurry or the FHA Ameridream program would run out and there would be no loan. My realtor fax the specs of the loan from the broker and the info on the townhome property without my knowledge to my accountant. The accountant gave me the grim news about my financial options. I was upset of course. Yet, escrow was underway. With the new light shed on my financial situation, I decided to end escrow by contacting the escrow company, my realtor, the seller's realtor, and broker through phone and e-mails. The escrow officer understood and stated my escrow money would be return to me. Yet, the broker sent an e-mail that she requested an appraisal on the townhome after my check was deposited and it had already taken place, therefore, I would lose $400. It was my understanding that the appraisal fee is part of closing costs during escrow and the seller agreed to that. I wanted out of escrow after learning from my accountant that my mortgage would be 68% of my monthly take home pay. Yet, the broker e-mails me and states that the appraisal fee is my responsibility not the seller. Does depositing $2000 for escrow by the escrow company afford them the right to spend my money on services when I have never seen the terms of service or breakdown of costs? Never met with an escrow officer to explain the procedures in the process? Does a lender even want to fund a buyer when the buyer's income is 68% of the mortgage? Why would a lender risk having a buyer belly up in this circumstance? Why would a mortgage broker put a buyer in this kind of jeopardy? Comments are invited.

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