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Escrow Questions & Answers

  • The technical definition of an escrow is, "A transaction where one party engages in the sale, transfer, or lease of real or personal property with another person who delivers a written instrument, money or other items of value to a neutral third person, called an escrow agent."  An escrow agent serves as an impartial holding area. Duties includes receiving funds and documents necessary to comply with those instructions, completing or obtaining required forms, and handling final delivery of all items to the proper parties upon successful completion of the escrow.

    The escrow agent must be provided with the necessary information to close the transaction.  This may include loan documents, tax statements, fire and other insurance policies, terms of sale, any financing obtained by buyer, and requests for various services to be paid out of the escrow funds. We obtain signatures from all parties, collect all outstanding funds and fees such as title insurance premiums, real estate commissions, inspection charges, etc.  We then transfer title to the property under the terms of the escrow instructions and the appropriate title insurance policies are issued. 

  • Opening escrow simply means starting the closing process by visiting the office of the escrow company, then handing over the deposit money and giving instructions for the transaction. Anyone who is involved in the transaction may "open escrow." Generally, the real estate agent takes the initiative and opens the escrow. In for-sale-by-owner transactions, in which no agent is involved, either the buyer or the seller or both together may open escrow.

  • Either buyer or seller, though both parties must agree to the date. Generally the buyer puts his request for a 30, 60 or 90 day escrow in the original purchase agreement. The seller may request a shorter or longer escrow, depending on his circumstances, and as long as the buyer agrees, that date will be set. Generally, a "financing contingency" is put into the offer to purchase in which the buyer is given a specified amount of time to obtain a mortgage. Once the buyer has a firm commitment from a lender, the actual closing date can usually be set. If you are the buyer, make sure the closing date is prior to the expiration of your lender's loan commitment or lock-in date for your interest rate. 

  • Closing costs usually come out to between 4 and 5 percent of your purchase price. The closing costs will include title searches, government taxes, notary fees, loan fees, escrow fees, recording fees, reconveyance fees, prorations and sales commissions.

  • The tax-deductible items are interest, points, loan-origination fees, any prepayment penalty, and property taxes. Reminder: property taxes paid on real estate are a deductible item on your personal income tax return. Contact your tax attorney for complete details.

  • Closing is the day in which the deed is exchanged for the sales proceeds money. The buyer deposits any remaining money due into escrow and signs his escrow and loan documents; and the seller will sign the deed and closing statements and receive a check for the money due to him. "Recording" will take place on that day, which means that the deed and any mortgage documents are taken to the county court house and recorded in the official records. These documents are then made of "public record" for anyone to see. The actual day that you can move in will be determined by local practice and the terms of your purchase agreement. It may be the day of closing, or it may be a day or two after the closing. 

  • Yes. Some lenders allow you to pay your own property taxes and home insurance premiums, especially if your loan-to-value ratio is below 80 percent. But don't be surprised if the lender boosts your interest rate to compensate for the additional risk it is assuming.

    Once an escrow requirement is in place, it can be difficult to persuade a lender to cancel it. If your loan is sold, as is common, and there is nothing in the lending agreement that provides for cancellation of the escrow requirement, you'll have to live with the decision of your new mortgage servicer.

  • The escrow holder may be any disinterested third party (although some states require that certain escrow holders be licensed). There are two important reasons for selecting an established, independent escrow firm or title insurance company such as Liberty Title. One is that real estate transactions require a tremendous amount of technical experience and knowledge. The other is that the escrow holder will generally be responsible for safe-guarding and properly distributing the purchase price.

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HL Retail Senior Loan Closer


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