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Home Buying - Escrow
If you planning to buy a home, you have probably heard several terms that you know are important but just not sure what they mean. “Escrow” is one of those words that play an important role in owning a home. This is when money is deposited and documents signed by the buyer and seller, handled by an impartial third party. The escrow gathers information and questions from buyers, sellers, lenders, inspectors, and so on, and helps define the terms and conditions by which the delivery of services will be delivered.

For example, in the state of California, escrow companies along with all the employees of that company must be bonded and licensed. The primary focus of the escrow is to enable all parties involved in a real estate transaction so they are protected and risk is significantly reduced or eliminated. The job of the escrow holder is to be a custodian for all funds and documents, to serve as a clearinghouse for payments of demand, and to perform necessary clerical details that would be associated with the settlement between all parties.

The escrow company wears many hats of responsibility and is responsible for various reports. For instance, a preliminary report must be created that shows ownership of the property. This report will also list any title defects, encumbrances, or liens on the property. Additionally, restrictions might need to be recorded associated with a prior deed. These are called CC&R, which stands for covenants, conditions, and restrictions. This report will be ordered once the escrow account is established, providing the homebuyer to ask for the removal of certain items prior to buying the home that he or she deems questionable or objectionable.

The escrow company has officers who work to ensure the buying and selling of a property is on the up and up and handled in a professional manner. The responsibilities are vast and include:
  • Arranges for hazard insurance with the homebuyer
  • Arranges for new loan funding with the lender
  • Collects funds for escrow for the buyer
  • Complies with the lender’s instructions
  • Disburses monies and documents to the appropriate parties
  • Handles all documents and any special instructions
  • Issues title insurance
  • Prepares both buyer and seller’s escrow instructions
  • Prepares the final closing statements for both the buyer and seller
  • Records the documents with the county recorder
  • Reviews the preliminary report and provides copies to the appropriate parties
The most prominent title companies include Chicago Title, Fidelity National, First American Title, Old Republic, and Stewart Title. If you have in depth questions about escrows, check each of these title company’s websites. Typically, there will be an FAQ page or contact information where you can call and talk to someone in person.

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