Explaining the escrow process

 The Purpose of the Escrow is Two-Fold. 

#1 – It guarantees the seller that the buyer has the funds needed for the purchase and that the money will be handed over once the title is transferred.

#2 – It guarantees the buyer that they won’t be scammed by a fraudulent seller who actually holds no claim to a title.

Read more below



Explaining the Escrow  Process

 What is a Title Company

The title company is a neutral third-party entity to the real estate transaction that works to assure all parties have a successful transfer of monies and property.  

The Purpose of the Escrow is Two-Fold. 

#1 – It guarantees the seller that the buyer has the funds needed for the purchase and that the money will be handed over once the title is transferred.

#2 – It guarantees the buyer that they won’t be scammed by a fraudulent seller who actually holds no claim to a title. 

 Opening Escrow With the Earnest Money Deposit

The real estate escrow process begins when the seller and the buyer of a home have a ‘meeting of the minds’ and an accepted offer to buy the home is signed by the seller, and the offer becomes a binding contract. 

 Within 24-48 hours of having an accepted offer, the buyer of the home will deliver a check for their Earnest Money Deposit to a title company.  The earnest money deposit is how the buyer shows the seller that they are interested in buying the home, it essentially puts ‘a hold’ on the property. 

What if the Buyer Backs Out of the Agreement?

If the buyer backs out of the contract for no reason, the buyer will forfeit this earnest money deposit. This is the fee given to the seller for taking their home off of the market for the buyer. 

If the buyer backs out with a  contractually approved reason the earnest money will be returned to the buyer and the seller can put the house back on the market. The term ‘with reason’ usually means some things were discovered during the home inspection process that the buyer did not like. 

 What Happens to the Earnest Deposit Money?

At closing, the earnest money payment is generally taken out of escrow and put toward the buyer’s down payment.

 What Is an Escrow Officer/Agent?

The person who will be managing the escrow process is known as the Escrow Officer/Agent. The Escrow Officer and their assistants will be gathering all of the information pertinent to the sale such as: Contracts and other documents, monies to keep the transaction moving along successfully, and then handling the money transfer at the end, creating the transfer documents, issue the various title insurance policies, and record the transaction with the County.  

Who Chooses the Title Company? 

Usually, the Buyer’s Agent will suggest the title company and agent they like because of past experience.  In Arizona, it is the Buyer who ultimately chooses the title company. 


What is an Escrow Account

An escrow account is a separate account managed by a lender to collect advance insurance payments and property tax payments from a homeowner. Usually, a lender will add up the total amount due for these payments in a year, divide it by 12, and tack on that extra amount to each mortgage payment. 

When those payments are due to either a homeowner’s insurance agency or the County Tax Assessor, the lender pays them for the homeowner out of the escrow account. 

How Does the Escrow Process Progress? 

As certain things take place during the home selling process, such as home inspections, negotiations, appraisals, and final walk-through, the title company is the ‘collector’ of all of these documents and they will be putting together the complete package for the day you sign to sell or buy the home. 

At the end of the process, after all parties have signed and funds have been received and monies paid out, the  escrow agent will record the transaction with the County Tax Assessor and the transfer of the property will then take place. 

Understanding the ‘Why’ of Escrow Services 

Understanding real estate escrow is all about understanding why it exists in the first place.

Unscrupulous thieves have scammed people out of their homes, property and money for over a hundred years.  This is why working with a title company, having an escrow account and title insurances are critical to a safer real estate transaction.

And while it may seem like just one more expensive task in the closing process, its benefits for both buyers and sellers mean that it’s well worth a couple of extra steps.

Buying or selling a home is a major transaction, and the more protections each party has in place, the better. As confusing as escrow might be, it’s an essential part of ensuring that your real estate transaction is a success.

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