If you are buying a home or property that has
been being rented out you may have wondered what will happen with
this rental income as well as the security deposits.
How is escrow going to affect these items at closing?
These are taken care of by proration and the income and the expenses
are split up fairly between the buyer and the seller both at the
time of closing.
Since the prorations will have a large impact
on your payment of escrow fees it is
important that
you take the time to ensure that the fees are all calculated
properly. That is the only way to make sure that you do not pay too
much. The security deposit and the rental income will most likely be
prorated on the date of the close, when doing things this way it is
the seller that will be continuing to collect any rents due until
there has finally been a transfer of title of the property. As soon
as escrow has been closed it will be up to the new buyer to collect
and not the seller anymore.
The seller will have to be
sure to credit the new buyer all of the deposits that renters have
put down on their units. Your escrow agreement should come with a
rent and deposit schedule so that you can see what all you should be
receiving. Not only that but the buyer should also get all the
leases and rental agreements that pertain to this property as well
as written assignment of the rents so that the buyer can collect
these rents. It does not matter if you get thee papers through the
seller or the escrow payment, as long as you get
them.