Buying a house is not an easy job as it involves a set of processes and steps. One of the difficult aspects of buying a house is to understand the Escrow process or the ‘closing’. A ‘closing’ occurs in the interim term when the seller accepts the purchase agreement and the buyer finally gets the keys into the new house.
Below are some of the steps that will help you understand Escrow and its relevance in the real estate marketplace:
- Get into an Escrow contract and open an Escrow account. There is an agent involved in this process that serves as a neutral third party and handles the deal, documents as also most monetary transactions.
- Wait for the appraisal from the Bank that in most cases the buyer pays for.
- Organise the financing of the property.
- Check and approve the disclosures from the seller.
- Ensure that the necessary inspections are in place. They could be Pest Inspection, Environmental Inspection and other inspection like soil report, flood report etc.
- Get the hazard Insurance done. This refers to the homeowners insurance as also other insurance as in flood prone or earthquake prone areas.
- Ensure that the Title Report and the Title Insurance are in place and acquired.
- Do a final revision that all the process steps have been followed.
- Do a thorough analysis of the HUD 1 form.
- Close the Escrow.
Although most of the above steps are overseen by the Escrow agent who will guide you on your actionable at every step, it is always good to have a good idea of the Escrow steps. This is because, you are putting in a lot of money into buying your dream home and as such would want all your money to be utilised well.
The real estate market can be a baffling world. If you are new in the world of real estate, among the first words you hear of is the title company. The term title insurance company means the same thing. The title company is basically a buffer among the different parties involved in a real estate deal. It is a company that does not have a stake in the transaction but gets a fee for facilitating the smooth transfer of the property between the buyer and the seller. It has the elementary functions to process the payment receipts, ensuring the rights of both the parties involved and managing insurance cover.
A title company is expected to be neutral to both the parties involved. Besides acting as a facilitator, one of the primary functions of such a company is to undertake a thorough background check of the property. There are instances when an estate may have conflicting ownership issues and default of property tax. It is the title company that ensures that a piece of property does not have any legal issues.
Very often these companies act as insurance agents that provide a safeguard in case the property is affected by unforeseen events. In case there is a problem with the legal status of the property, the company is liable to pay damage compensation to the buyer.
Sometimes, the company can serve as an escrow as well. However, the escrow account is not set up in the name of the title company. There can be another company, a subsidiary or otherwise, arranged through the title company
It is the job of the title company to check all the requisite paperwork is in order. If it has not been done, the company takes steps to complete it. Both the parties rely on them for a successful conduction of the deal.
Many would be familiar with the term escrow commonly used in real estate terminology. It is essentially a third party that facilitates the sale and purchase of the property. One of its essential functions is to act as safety net for both the parties involved. The seller deposits its agreement with the escrow and the buyer makes the payment through the escrow. Only when the conditions of both the parties are satisfied, can the actual transfer of the title deed take place. In return for the service, the escrow earns a commission.
Once the buyer has completed the requisite payments, the escrow account can be closed. Since the terms of the escrow account is legally binding, the date for closing the deal is often stipulated. However, more often than not, parties default in their payment or the production of the paperwork. Such instances can lead to termination of the entire deal and financial losses for both the party.
Missing the Date of Escrow Closure
The reason for missing the date of escrow closure may be because of the buyer or the seller or both.
- A buyer normally should not be expected to default. However, there are times when financial hitches do not allow the payment to be completed on time. Such a scenario may be devastating for the buyer. The other party may refuse to return the amount already paid and claim compensation for damages.
- There are times when the seller fails to meet the requirements of the contract as well. Under such conditions, the buyer may decide to sue the seller and take legal action, at times forcing the seller to conduct the deal or pay some compensation.
- Sometimes, it may happen that both the sides involved are unable to meet the deadline. This may be solved by a mutual agreement between both the parties involved.
REO stands for Real Estate Owned. These are the properties that have being seized by the company due to no payment of mortgage or other such defaults. These properties are held in custody by the company or government agency until another party agrees to buy it. There is a well laid procedure for such a purchase. Red tape slowing down does not occur in such deal and this is a major advantage.
When REO property is set to be sold, the process involved is competitive bidding. Through an escrow agent, anyone wishing to purchase the property can quote their bids for consideration. We follow the essential steps of these purchases.
- Transfer of a completed bulk REO agreement – This is sent to the real estate company by the party that wishes to acquire the REO.
- The real estate company then sends the document to the escrow and the broker of record.
- After an agreement has been reached, banks come into the scene. Escrows then revert for a bank letter to the bank of the buyer.
- Banks do the necessary checks and revert to the escrow agent. Verification of the funds of the buying party by the escrow agents
- Broker of Records come into play here. It forwards the letter through the adequate financial details and places a bid for the property.
- If the bid of a prospective buyer is successful, he is notified through the escrow agent and given a 48 hour red tape period to check the condition and decide whether to go ahead or not.
- During this period, the prospective buyer can go through the tape and check the property.
Of course there can be times, when the buyer decides against buying the property. Under such conditions, the escrow is liable to return 90% of the payment made by the buyer. 10% is held by the company as non refundable charges and damage claims.