What Is The Escrow Process? Escrow Agency Services

When buying a home a lot happens and there are a lot of terms tossed around by your real estate agent and your mortgage loan officer. Some of the terms you might hear are open escrow, escrow officer, title insurance, and title agency. All of these terms are related. One of the first terms associated buying a home is what is known as the process of escrow.

What Is The Escrow Process?
"Very simply stated,” says Tom Diller of Guaranty Title Agency of Arizona, “the process of escrow is when, during a transaction between two or more parties, the written instrument (real estate sales contract and mortgage documents), money or other items of value are transferred to a neutral third party.” This neutral party, the escrow agent, holds the money or valued items for disbursement upon the occurrence of the specific event or performance of a specified condition.
Translation for the home buyer: Typically a real estate agent will notify a title agency or title insurance company that they have an accepted sales contract between a buyer and a seller. This notification begins or opens the escrow process which sets into motion a lot of activity which can be read about below.

An escrow agent impartially carries out the written instructions specified in the purchase contract by the principals – home buyer and home seller. Thus, when escrow “closes”, it means that all of the specified requirements by both parties have been met and the money and property can then exchange hands.

What Happens During the Escrow Process?
Between the time escrow starts and ends, the agent performs many tasks and coordinates instructions from the mortgage lender, sometimes the mortgage broker, the real estate agent, and sometimes the home buyers and sellers. To help explain escrow, the following is a brief list of the activities that the escrow agent (title agency) manages:

Prepares escrow instructions:

The agent prepares all required documents in accordance to the terms of the sale.

Performs a preliminary title search:

The agent researches the present condition of title to the property to determine if there are any deeds of trust, liens or judgments against it. In the case of loan assumption or subject to loan, the agent will also request a beneficiary’s statement or formal assumption package.

Works with mortage lender:

The agent works with the mortgage lender for the sale and makes sure that the transaction and all documents comply with the lender’s requirements.

Collects funds:

The agent receives the purchase funds from the buyer and/or lender for the transaction.

Prepares mortgage and other legal documents:

The agent secures and prepares the deed, as well as other documents related to the transaction.

Makes Financial Decisions

According to the instructions prepared earlier, the agent prorates taxes, interest and insurance that may need to be collected at the time of the sale.

Ensures that all conditions are met:

For most sales, there are certain conditions, or contingencies, that must be met before the sale can be finalized. These may include a successful home inspection, obtaining acceptable financing, or meeting building codes. The escrow agent makes sure each condition is met and secures releases for each one.

Records deeds and any other documents as instructed:

The agent records all required documents for the sale with the County Recorder.

Requests issuance of the title insurance policy:

The agent orders the title insurance policy from a title insurance company, which protects the buyer against financial loss due to errors in title, liens or other matters.

Closes escrow:

Once all instructions have been carried out from the mortgage lender and sales contract and everything is in order, the agent will close escrow by preparing the final documents.

Disburses funds:

As authorized by the instructions from the mortgage lender, the agent disburses funds to the seller and any other parties due monies from the sale, including paying off existing encumbrances.

Using A Title or Escrow Agency Keeps The Home Sale Process Smooth
Having a neutral third party keeping an “eagle eye” on the terms and conditions of the sale enables a much smoother process than if the buyer and seller were to be responsible for all of those tasks themselves.
Article written by Guaranty Title Agency of Arizona. Guaranty Title Agency has been serving the needs of the Arizona real estate community for over 30 years. During those years, we’ve developed a strong culture of valuing each client who asks us to serve them. We work for you. We don’t ever forget that. We’ll listen to your suggestions, and do everything we can to exceed your expectations. We’re your Partner for Success.