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The Escrow Process Question and Answer
What is the Escrow Process?
The Escrow Process is conducted by a settlement company that is an impartial third party, who is financial secure, and knowledgeable of the subject matter of real estate transactions. They handle the transfer of funds between the parties of the transaction and insure that all the correct documentation has been recorded in its appropriate places whether with the lender and/or at the court house. The escrow process has been developed for protection of the parties involved typically the buyers, sellers, and the lender.
What are the duties of the escrow/settlement company?
The escrow/settlement company is responsible for carrying out the instructions from the various parties involved whether it is a lender, financial institution, real estate agent, or borrowers. These instructions include but are not limited to receiving funds, wiring funds, clearing title, recording title, and returning all documentation to the correct companies/government agencies.
What does the escrow/settlement company need from you?
In most cases a transaction relies on the obtaining of financing, it is the buyers/ borrowers duty to acquire a loan, the bank or broker then will provide all the documentation that is needed for the transaction to the escrow/settlement company, in order to provide a clear title for the transaction. The documentation needs to be processed through the escrow/settlement company before the transfer of property can occur.
What happens when all the instructions have been fulfilled?
After the escrow/settlement company has fulfilled all of the instructions that has been set forth by the parties involved then it is time to have closing. In preparing for closing the escrow/settlement company collects all of the fees for the transaction. Fees like the title insurance premiums, commissions to be paid to real estate agents and mortgage lenders, survey and termite fees (when applicable), taxes, and escrow payments for lenders (when applicable). When all of the fees have been accounted for, the transfer of the property can take place under the terms that are set forth in the escrow instructions and from the title insurance company.
How do I know what fees are involved in my transaction?
The escrow/settlement company responsibility is to issue a HUD -1 which will be explained to the buyers and sellers at the closing table. (Click here for Sample HUD -1) The HUD-1 has listed out in an easily readable form. The HUD-1 is broken down into sections and is numbered from 100 section through the 1400 section. Things to look for on the HUD-1:
Commonly Used Terms and Definitions
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The Escrow Process Q and A
Excellence is a Standard
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