A. Escrow is the process occurring between contract acceptance and title transfer during which the buyer deposits purchase money and the seller deposits applicable transfer documents.
B. The escrow is the central point of contact for all parties to the transaction as well as third parties such as lenders, insurance agents, service providers and the real estate agents.
C. The escrow agent is an independent, non-biased third party, or fiduciary, whose function is to ensure that the conditions of the purchase contract and lender’s loan requirements have been met prior to the recording of the deed (known as the “close of escrow”). In this capacity the escrow officer may act only upon mutual, written instruction and, while representing all the parties, may not favor one over the other.
Who Chooses the Title & Escrow Company?
There are myths and misconceptions surrounding the RESPA guidelines regarding the selection of title and escrow services in a Real Estate transaction. Lets take a look…
MYTH: RESPA (the Real Estate Settlement Procedures Act) dictates that the Buyer chooses the Escrow Agent.
MISCONCEPTION: The Seller has no choice in the selection of the Settlement Agent.
MYTH: Naming a preferred Escrow Agent in a listing publication is a violation of RESPA.
MISCONCEPTION: It is a violation of RESPA for the Listing Agent to “counter” the choice of Title Company.
Since Escrow Service and Title Insurance are two separate functions, RESPA does not address the choice of Escrow or settlement Agent at all. Only by requiring a Buyer to obtain title insurance from a specific source would a Seller be in violation of RESPA.
The choice of Settlement Agent is a negotiable point in the transaction. It is equally acceptable for the Seller to include a choice of Escrow Agent in a counter offer as long as it does not force the Buyer to obtain Title Insurance through a company unacceptable to the Buyer as a condition of the Sale. The Seller cannot dictate, against the will of the Buyer, that Title Insurance be purchased from a particular source. However, negotiation which is ultimately agreeable to all parties, is not a violation of any State or Federal guideline.
The Escrow Opening Process
- Provide a clear copy of the purchase agreement, addendum, and clarifications of the terms of the agreement.
- Property address and or APN (Assessors Parcel Number).
- Correct names of Sellers and Buyers.
- Phone numbers and address (let escrow officer know if either party is out of state.)
- Commission instructions for both listing and selling agents.
- Earnest Money deposit check.
- Special considerations for clients.
- Special documents needed for approval (i.e. power of attorney, trust certificate).
Additional information needed by Seller:
- Existing loan information from Sellers
a. Loan number
b. Address and telephone number of the loan company
c. Social Security Number of the Sellers
d. Approximate balance of all loans (i.e., short sale or prepayment)
Additional information needed from Buyer:
- Buyers information including phone numbers, current address, and most importantly:
a. New Lender
b. loan officer, phone/fax number
c. loan terms
d. insurance agent
The Real Estate Closing
“Close of escrow” is a term that most people know, but the closing process often remains a mystery even to seasoned buyers and sellers. Unlike many other states, Nevada does not use a formal “sit down” closing with buyers and sellers, their agents, bankers and attorneys seated around a table. The closing process usually begins 2 to 4 days prior to the scheduled close of escrow with the lender delivering the buyer’s loan package and closing instructions to the title company. The escrow officer then prepares a settlement statement containing a full accounting of all the costs in the transaction, notifies the buyer of any additional funds needed to close and sets an appointment for the buyer to sign the loan documents.
The Buyer’s deposit must be a cashier’s check or wired funds. When the lender’s documents have been signed they are returned via messenger, express mail or fax to the lender’s loan closer who will review and approve the package for funding. After the package receives final approval the closer notifies the escrow officer that loan proceeds are available. Once all required funds are deposited and available for withdrawal in the escrow bank account the deed is released for recording. When the deed records, escrow has “closed”.
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