Isn’t Escrow Where They Just Hold Your Money?
Good question. That is only one of the functions of escrow.
Let’s look at what escrow is and what it is designed to do.
Escrow is a neutral third party that assembles and processes all of the documents in a purchase and sale agreement of real property. The instructions which the escrow officer is to follow are contained within the purchase and sale agreement. Other duties include:
1. Obtains the order for title insurance.
2. Obtains approvals from the buyer, the commitment for title insurance, and any other inspections that are called for in the purchase and sale agreement.
3. Obtains any required payoffs and release of documents to clear title.
4. Receives funds from the buyer and/or lender.
5. In most cases, prepares the vesting documents and excise tax affidavit on sellers’ behalf.
6. Prorates insurance, taxes, rent and any other fees associated with the transfer of title.
7. Prepares a final statement of settlement for each party indicating the amounts paid in conjunction with the closing of the transaction. This document is often referred to as the HUD 1.
8. Oversees the signing of the loan documents.
9. Forwards the deed to the county for recording.
So as you can see, the role of escrow extends further than just “holding your money.”