In this article, we will be discussing what to look for in an escrow partner and how a slow escrow can cost you. But first, let us establish what an escrow is, how it works and why it is important:
When someone goes to buy or sell a house and a check is written, the deposit is not held by the buyer or the seller. It is held by a third party who is said to hold it in “escrow”. This third party is normally the closing company, an attorney or a title company agent. The money remains with that third party who holds onto it until the buyer and seller are ready to close the deal.
An escrow is important because it acts as security for both parties. If you are wondering how escrows act as security, consider these two circumstances.
1. The buyer hands money over to the seller but they cannot reach a final purchase and sale agreement. The seller holds onto the money and refuses to refund the money as leverage in negotiations
2. The seller signs the deed to the home over to the buyer before the buyer “hands over” the money and when it is time for the seller to be paid, the buyer comes up short
Escrows ensure that both the buyer and the seller are protected and that the dealings are fair
WHAT TO LOOK FOR IN AN ESCROW PARTNER
An escrow partner is responsible for:
• Ensuring the smooth flow of documents to all parties involved
• Obtaining approvals, reports, and documents when necessary
• Keeping all parties updated throughout the escrow process
• Preparing deed
• Securing issuance of title insurance policy
• Distributing funds for title insurances, loan payoffs, real estate commissions, etc.
Therefore, choosing the right third party to hold the deposit in escrow should be something that is considered carefully. Any potential escrow partner should be researched thoroughly and should be judged on:
Their independent status. Escrow partners should be a neutral, unbiased third party who is in no way affiliated with a real estate company or mortgage firm
Their experience. Your escrow partner should be someone with adequate experience and has been in the field long enough to not only be competent but be able to explain how the process works to their clients and has had good relationships with past clients
Their resources. In this day and age, the best escrow partners are those that are up-to-date with the latest technology and has technological resources such as e-signatures, digital storage, security and cloud technology.
The cost. In everything you do in life, it is always important to have an idea of costs beforehand. This will ensure there are no surprises or unexpected expenses. A good escrow partner will provide you with an estimate of the price of selling your house along with an estimate of the escrow service charge.
NB: A small percentage of the cost of the home usually goes to the third party who holds the escrow for their service.
HOW A SLOW ESCROW CAN COST YOU
An escrow is usually slowed down by mistakes or negligence. This can involve misspelled names or incorrect street addresses or a missing page from key documents. But how can a slow escrow cost you? An escrow is usually 30-45 days and if it is longer than that it can be quite frustrating for those who want to get their property sold quickly and money into their hands, or for those who wish to move in as soon as possible. It also costs time delays and unnecessary confusion. For sellers who are victims of a delayed escrow process, taxes, HOA expenses, and interests will still have to be paid for each day they are still the owner of the property. This is why you and all other parties involved should ensure everything is in order before beginning the escrow process.