What is escrow?
One of the more confusing things for buyers and sellers of real estate is escrow. We always try to point out the important aspects and timing, so that all transactions go as smoothly as possible. Here is a basic primer to assist with that.
An escrow is a neutral, independent account created to process a transaction such as a sale or loan. It protects the interests of all parties involved and favors neither the buyer nor the seller. An escrow is created after the Purchase Contract is executed and becomes the depository for all monies, instructions and documents pertaining to the transaction.
We often get questions about whether clients need to speak to attorneys. While using attorneys in real estate transactions is commonplace in many states, it is not required in Arizona. Title companies take the reigns regarding escrows in Arizona. However, if you are more comfortable having an attorney review the documents, or there are some unusual circumstances with your particular transaction, then you might want to involve an attorney as well.
How does the escrow process work? The escrow officer follows instructions based on the written terms of your Purchase Contract and the lender's requirements for closing. The escrow officer secures the satisfaction of all requirements of the title committment. Escrow cannot be completed until all terms and conditions have been met.
Either real estate agent (buyer or seller) may open escrow as soon as the Purchase Contract is executed by placing the initial deposit (earnest money) in an escrow account at the Title company. You will be asked to complete a Statement of Identity for the Title Company. This is a confidential documnet to correctly identify all parties involved in the transaction.
Title companies provide escrow services in Arizona. An escrow officer is employed by the title company to handle the escrow transaction. Some of the duties of the escrow officer include:
Accept the executed contract and issue an earnest money receipt
Request a committment for the title insurance- this shows the requirements for issuance of the title policy
Order payoff or assumption statements from existing lenders
Prorate taxes and insurance upon instructions from the buyer and seller
Accept hazard insurance policy, inspection reports and any relevant bills or liens
Compute settlement figures
Assist the buyer and seller when signing documents
Record the appropriate documents with the county recorder
Disburse final documents and money on the basis of the escrow instructions.
Many people think of closing as the actual signing of the documents. Closing actually occurs when the deed is recorded with the county. More on that in our next installment.
We do not intend this to be the complete description of all that occurs with an escrow. We will always defer to the appropriate professional (in this case an escrow officer) for more definitive questions concerning your particular escrow.
Have a great week and Happy Halloween.
Adam Tarr, ABR, e-Pro
Sharon Kotula, ABR
Your Phoenix Area Real Estate Source
RE/MAX Excalibur
Scottsdale, AZ
480-483-3333
info@WeAreAZRealEstate.com