If you are buying or selling a home, you may have heard the term “escrow”. Simply put, you can think of escrow as a central station for making sure all the terms of the transaction are met. The escrow officers make sure all paperwork is collected and distributed to all parties who have an interest in the transaction as well as making sure all funds and activities are taken care of in a timely fashion.
You might have heard of a “30 day” or “60 day” escrow and what this simply refers to is the amount of time the transaction is expected to take to go from contract to closing. The actual “closing” refers to when the property ownership change is officially recorded with the municipality.
Regardless if you are a buyer or a seller, you will receive communication from your escrow officer during the transaction, so be prepared to communicate with this party as well as your real estate agent.
What buyers need to know
Once an offer is accepted by both parties, the purchase and sale paperwork is submitted to escrow along with your earnest money. Escrow will begin their lengthy list of “to dos” which will likely include:
- Making sure contingencies are satisfied such as inspection, financing, or sale of another home.
- Making sure buyer and seller signs off on such forms such as seller disclosure.
- Working with “Title Officers” to make sure that the seller has a legal right to sell the property and there are no others who may have an interest in the property. Occasionally there are liens taken on the property by parties such as local municipalities, contractors, the IRS, etc to make sure that debts to these parties are satisfied on or before sale.
- Making sure the buyers receive a copy of the “Title Report” which will indicate any easements and identify any parties who may be granted ongoing access to the property.
- Making sure that other benchmarks are reached such as the septic and well inspection.
- Making sure all the necessary paperwork is signed by the buyer including loan documents as applicable.
What sellers need to know
Unless there are liens on the property, the seller may have very little contact with the escrow agent until it is time to sign. However, the escrow agent will work on the sellers’ behalf to:
- Check with the mortgage holder to arrange the loan payoff.
- Get utility account numbers in the event balances need to be paid out of closing money.
- If there are taxable proceeds from the sale, escrow will send the IRS notification of these funds.
It is important to respond to any requests from your escrow officer in a timely manner else the transaction may be delayed. There are many other steps an as every transaction is unique!