What Is Escrow?
What is escrow?
Escrow is the process wherein the Buyer and Seller deposit written instructions, documents, and funds with a neutral third party until certain conditions are fulfilled. In a real estate transaction, the Buyer does not pay the Seller directly for the property. The Buyer gives the funds to an escrow company who, acting as an intermediary, verifies that title to the property is clear and all written instructions in the contract have been met. Then the company transfers the ownership of the property to the Buyer through recordation and pays the Seller. This process protects all parties involved.
In Nevada, escrow services are generally provided by a title insurance company instead of an attorney. The stability, reliability, and performance of your title and escrow company are vital to protecting the interests of all parties to the transaction.
How is escrow opened?
Once you have completed the contract (or Real Estate Purchase Agreement) and the Seller has accepted the offer, your Realtor® will open the escrow. The earnest money deposit and the contract are placed in escrow. As a neutral party to the transaction, an escrow company can respond only to those written instructions agreed to mutually by all “interested” parties (Seller and Buyer); The escrow company cannot otherwise alter the contract or create instructions, and that protects all interested parties.
How to hold title?
You should inform your escrow officer and lender as soon as possible of how you wish to hold title to your home and exactly how your name(s) will appear on all documents correctly. (changes later, such as adding or deleting an initial in your name, can delay your closing.) You may wish to consult an attorney, accountant or other professional before deciding how to hold title.
What happens at your title company?
During the escrow period, the title department begins researching and examining all historical records pertaining to the subject property. Barring any unusual circumstances, a commitment for title insurance is issued, indicating a clear title or listing any items which must be cleared prior to closing. The commitment is sent to you for review.
Your escrow officer follows instructions on your contract, coordinates deadlines, and gathers all necessary paperwork. For example, written requests for payoff information (called “demands”) are sent to the Seller’s mortgage company and any other lien holders.
Consider this…
One escrow transaction could involve over twenty individuals including Realtors®, Buyers, Sellers, attorneys, escrow officer, escrow technician, title officer, loan officer, loan processor, loan underwriter, home inspector, termite inspector, insurance agent, home warranty representative, contractor, roofer, plumber, pool service, and so on. And often one transaction depends on another.
When you consider the number of people involved, you can imagine the opportunities for delays and mishaps. So, much like an airline pilot can’t prevent turbulence during a flight, your experienced Realtor® and escrow team can’t prevent unforeseen problems from arising. However, they can help smooth out the bumps and, whenever possible, get you safely through to a successful closing.