Removing the Mystery Of Escrow
One of the most common questions I get from clients is what is escrow? It can seem a bit mysterious, but its actually pretty simple:
An escrow company is a neutral third party that oversees the contract to make sure that no funds will change hands until all the terms of the purchase contract have been met. They also make sure the interests of all parties are protected. They collect all funds, examine all documents, and verify that each party has upheld their end of the bargain before releasing title and funds to the buyer and seller, respectively.
The company is selected and agreed upon between the buyer and seller and once an offer is signed and accepted, the escrow process begins. A deposit called earnest money (typically 3% of the purchase price) is wired to escrow within three business days. The escrow officer will then prepare escrow instructions and generate opening packages for all parties to be signed, and work with the title company to make sure that “clear title” can pass from seller to buyer.