You'll probably hear the word "escrow" many times during your home for sale in Winter Haven FL buying transaction. The term can be confusing because it is used to describe different events that take place before and after the real estate settlement. Let's take a look at how real estate escrow works during the entire process of buying your home, from offer to close.
What Is Escrow For Real Estate?
An escrow is “a deposit of funds, a deed or other instrument by one party for the delivery to another party upon completion of a specific condition or event.” It is an independent neutral account by which the interests of all parties to the transaction are protected. When opening an escrow, the buyer and seller of a piece of property establish terms and conditions for the transfer of ownership of that property.
These terms and conditions are given to a third, impartial party known as the escrow holder. The escrow holder has the responsibility of seeing that the terms are carried out. The escrow is a "storehouse" for all monies, instructions and documents necessary for the sale of your home. This includes the buyer providing funds for a down payment, and the seller depositing the deed and any other necessary papers.
How does the Escrow Process Work?
The buyer, seller, lender and/or borrower cause escrow instructions to be created, signed and delivered to the escrow officer. The escrow officer will then process the escrow, in accordance with the escrow instructions. When all conditions required in the escrow are met, the escrow is "closed" and you become the proud owner of one of the beautiful homes for sale in Winter Haven Fl.
Prior to close of escrow, the buyer deposits the funds required with the escrow holder. The buyer instructs the escrow holder to release the money to the seller when:
- The deed records
- A policy of title insurance will be prepared and delivered to the buyer
The escrow holder acts for both parties and protects the interests of each within the power of the escrow instructions. Escrow cannot be completed until the instructions have been fully satisfied and all parties have signed escrow documents. The escrow holder takes instructions based on the terms of the purchase agreement and the lender's requirements.
The duties of the escrow holder include:
- Managing the funds and/or documents in accordance with instructions
- Paying all bills as authorized
- Responding to requests from the principals
- Closing the escrow only when all terms and conditions have been met
- Distributing the funds accordingly
How Do I Open an Escrow?
Generally, the buyer's or seller's real estate agent will open the escrow. As soon as you complete the purchase agreement, the agent will place the buyer's initial deposit, if any, into the escrow account at a title company or into the real estate broker's account.
How Long is an Escrow?
The length is determined by the terms of the purchase agreement and can range from a few days to several months.
What is an "Escrow Closing"?
An escrow closing is the culmination of a transaction. It signifies legal transfer of title from the seller to the buyer. Generally, the Grant Deed is recorded within one working day of the escrow holder's receipt of loan funds. This completes the transaction and signifies the "close of escrow." Once all the conditions of the escrow have been satisfied, the escrow officer informs you or your agent of the date escrow will close; taking care of the technical and financial details. The final closing papers are disbursed upon close of escrow, when the escrow officer verifies with the County Records Office that the documents have recorded, and legal transfer has occurred.
While escrow can sound like a confusing term and process, it is an important one to understand when buying or selling a home. Having a working knowledge of the process before entering into the transaction will help keep you on track and avoid any surprises along the way. Just remember, your real estate agent and escrow officer are there to help you and will answer any specific questions you have about your transaction and escrow.