Welcome to our blog. This is where you can find tips, suggestions, and advice on how to move through escrow as painlessly as possible. Escrow doesn’t have to be scary, and that is why the team at Darlene Harwick is here to help. Let us put our industry experience and knowledge to work for you so you can rest easy during this part of purchasing your new home. We love the desert lifestyle in Palm Springs, and we know you will too. Don’t try to figure out all the details involved with your escrow, let us help! The staff at Darlene Harwick looks forward to serving you!
When you begin the process of looking for a home, you will hear about the necessity of putting money into escrow. While you have probably heard this word before, you may not be able to easily define what it is or why you need it. In today’s post we will take a look at the definition, as well as some of the basic principles involved with the process of escrow. When you’re done reading, be sure to contact Darlene Harwick in Palm Springs to see how she can help you find your dream desert home.
Simply defined, escrow is a bond or other document that is kept in the custody of a third party that takes effect only when a specified condition has been met. In practice, this means that a neutral party, or “middleman”, holds money or assets being transferred between two parties until the legal obligations have been met by both sides. This practice is utilized in business transactions to ensure that neither side is cheated in the process. In the framework of homeownership, escrow refers to money that is held in an account which pays for property taxes and insurance each month as part of the mortgage payment agreement. You do not have to worry about setting up the escrow account as it will be taken care of by either a title agent, attorney, or other party who is paid to provide this service.
We mentioned that the primary function of escrow is to ensure that money does not change hands until all aspects of a contract have been fulfilled. Let’s take a moment and clarify all of the parties that are involved in a real estate transaction. The three main parties are the buyer, the seller, and the lender. The lender is typically a banking institution. The escrow officer is usually an employee of a title company or mortgage company who will work with your real estate professional to ensure that all necessary information is included in the instructions in the escrow document.
Unlike your checking or savings accounts, your escrow account holds a very specific balance that will be processed during the closing on your new home. Lenders frequently request the balance to be equal to two months of the following items: estimated property taxes, mortgage insurance payments, and homeowners insurance payments. While this may seem like a lot of money to pay up-front, it will benefit you in the long-term if prices increase on any of these items. You will benefit from having a cushion in the account, rather than having to make up the difference if it is shorted.
A minimum balance requirement is an excellent safety measure to have in place, as it ensures that a negative balance is not accidentally incurred. When it comes to your escrow account, the minimum balance requirement is determined in a slightly different manner from the requirement for a traditional checking account. The minimum balance is not to dip below two months’ worth of payments. This time frame of two months is based on figuring out one-sixth of the total amount of items that are paid from this account. Just as a minimum balance in your checking account protects you from overdrafts, the minimum balance in your escrow account helps to guarantee that if your taxes or insurance payments increase, you will not be in a position where you are facing a large shortage.
Purchasing a home involves a lot of paperwork and industry-specific terms that can be overwhelming. When you work with Darlene Harwick, however, she will take care of each piece along the path of homeownership for you. Contact her team today and learn how they can make it easy for you to find the desert home you’ve always wanted to have in Palm Springs.
Escrow can be a somewhat confusing process for buyers and sellers, but think of Escrow as the neutral third party that acts as the depository for documents and money in a real estate transaction.
Upon request, escrow provides copies of the real estate purchase contract, earnest money deposit and escrow instructions to the lender at the beginning of the transaction. Additional items may be estimated closing statements, copies of trusts, homeowners’ association information and evidence of insurance.
Escrow provides the title company with the buyers and sellers completed statements of information and items specified in the preliminary title report as needed to clear title. The title officer reviews them and may request additional items. Escrow creates the estimated and final closing statements, which are an accounting of the real estate transaction. Escrow receives prints and reviews the loan documents, specifically the lenders instructions. Escrow will prepare the estimated HUD statements and arrange the signing of these and other documents with a notary public. Once signed and returned to our office, Escrow assists the lender in compiling funding conditions. Escrow is then notified by the buyer’s lender when they are ready to release loan funds. When all conditions of the escrow have been met, including receipt of all necessary and cleared funds, Escrow notifies the title company to release the documents for recording. Upon confirmation of recording, escrow completes the prorations and costs in order to reconcile/balance all funds to be disbursed. The final HUD statement is prepared by escrow.
Some things escrow cannot do or take responsibility for:
Process the buyer’s loan.
Underwrite the title insurance.
Make decisions on the items provided to title and the lender.
Give tax or legal advice.
Mediate or arbitrate on disagreements between the parties.
Prepare unilateral amendments or instructions without other parties’ knowledge.
Take verbal instructions.
Order inspections, appraisals and reports (this includes Home Warranty, Zone Disclosures etc).
Order repairs to be made.
Obtain signatures on disclosures provided by the real estate agents.