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Escrow:Escrow
is a process by which a complex sale, exchange or loan transaction
involving the real property is brought to completion. Once parties reach an
agreement, the arrange for a natural withrd party to hold
their funds and documents of transfers until all the required
elements of the deal had been fulfilled. While the funds and
documents are held pending conclusion of the deal they're said to be
“in escrow”.
The third
person is the escrow agent.
He is the stakeholder.
Although the main function of escrow is to provide a safe
place for the stake, the collection of documents and funds, until a
deal can be concluded, is also the place where many arrangements and
accounting details are cleared
up.
An escrow is opened with the parties signing
escrow instructions. A valid escrow consists of signed agreement and
conditional delivery of transfer documents to the escrow. Once
escrow instructions have been signed by both buyer and
teller, any change to the instructions
requires the signatures of both buyer and seller.
When the
escrow disburses funds and records the deed, the escrow is
considered to be closed. A losing statement is issued by the escrow
showing the debits and credits of transaction. Rents, taxes, and
insurance are likely to be prorated by the escrow. Proration is
based in a 30 day month and a 360-day year. After escrow closes, the
broker should make certain his or her client fully understands the
closing statement.
Title Insurance: Title insurance
insures the ownership of real property (land, buildings, and
minerals below the surface) against any encumbrances and other items
that may cloud the title. These are primarily claims that might be
made by a third party against the property. Buyers are assured that
a thorough search has been made of all public records affecting the
property being purchased and that they have a marketable title.
Title
insurance is paid for once, at the time title passes from one owner
to another, and it remains in effect until the property is sold
again, at which time title passes to the new owner. Of property
owner dies, title insurance continues to protect the owner's
heirs.
If a buyer
does not elect to buy title insurance, that buyer is not protected,
even though a prior owner had title
insurance.
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