We hear buyer and sellers often use this phrase and in context, we know that this means the process of buying/selling a home is almost done, but what does it really mean?
In real estate, escrow companies are non-interested third parties that hold funds from both parties until all agreements of a contract have been fully executed. Ever wonder how a seller actually gets paid when selling their real property? Escrow! Financers of the purchase of real estate, whether it’s a lender or cash purchaser, deposit that money into an escrow account where the money is securely held from both parties until the transaction is complete. So, the buyer hands the money to Escrow, who keeps it safe, until both parties have fulfilled their end of the agreement. Escrow then hands that money over to the seller at closing, simple as that. The purpose of escrow is to secure the transfer of larger sums of money in the purchase or sale of real property, and in many other negotiations for sales involving large sums of money. In doing so, both the buyer and seller are protected and ensured that the proper amount of capital is accounted for. Escrow, of course, charges a fee for its services, another expense that rolls into closing costs. Check out our post about closing costs to learn more about other fees that are rolled into this expense.
Many title companies offer escrow services in transactions of real property. The process begins with the buyer, or the buyer’s representation in the transaction submitting an order with the title company that will be providing escrow services. Then an order is submitted to the department that is responsible for titles wherever you are buying your home. Following this submission, the buyer will receive beneficiary statements which will be followed with a request for the property’s lien information. The escrow company then collects documents on incurred bills from home inspection, homeowner’s insurance, home warranty etc. In the case of mortgages, Escrow then receives documents from the lender enumerating the lender's involvement in the transaction. With this information, the company then prepares proper documents for signatures. After thorough review of the file, the escrow companies seek signatures from all necessary parties. Once all of this paperwork is squared away, the escrow company then obtains funds from the buyer, and the lender if applicable, and deposits it into an escrow account. On the day of closing, the escrow company disperses the funds.
Once this exchange takes place, the place is officially yours!