What You Need to Know About Escrow When Buying or Selling Home in Arizona
Whether you are buying a home or selling a home in Arizona, you will go through the escrow process. Escrow process occur once both buyer and seller had accepted an offer and agreed on all the terms and conditions. Escrow is one of the important process in real estate transaction in Arizona. During the escrow, it will determine whether the transaction will complete successfully or not.
What is escrow?
An escrow is an independent, neutral intermediary that manages the exchange of money for real property. Whether you are the buyer, seller, lender, or borrower, you want the comfort of knowing that no funds or property will change hands until all of the instructions in the transaction have been followed and conditions met. The escrow holder, aka escrow offier must safeguard the funds and documents while they are in the possession of the escrow holder. When all conditions of the escrow transaction have been met and the parties agree, the escrow holder will disburse funds and record the documents conveying the title.
How does escrow work?
Once the parties to the transaction (buyer/seller/lender and/or borrower) have reached an agreement, the signed contract or purchase agreement, along with the buyer’s earnest money deposit, is submitted to the escrow officer. At that point, an escrow is opened. The escrow officer will now follow the mutual written instructions of the buyer and seller. Escrow officer will maintaining a neutral stance to facilitate the successful exchange of money and property between the parties. The escrow officer will also follow the instructions of the lender in meeting their conditions.
Duties of an escrow officer
The duties of an escrow holder include:
- The processing and coordination of the flow of documents and funds
- Ordering the title search which will indicate the record of ownership and status of the subject property
- Responding to lender’s requirements
- Responding to authorized requests from parties to the transaction
- Coordinating with the lender on the preparation of the Closing Disclosure
- Preparation of a settlement statement that shows the costs and charges associated with the transaction
- Facilitation of the signing of loan documents
- Closing of the escrow, only when all conditions are met and funds are in place in accordance with instructions
What happens during escrow?
Here is what happening during escrow process:
- Open escrow and deliver earnest money deposit to be held in a separate escrow account
- Conduct a title search to determine ownership and status of the subject property
- Issue a title commitment and begin the process to delete or record items to provide clear title to the property
- If applicable, request payoff information for the seller’s loans, other liens, homeowners association fees, etc
- Prorate fees, if applicable
- Prepare the settlement statement
- Coordinate with the lender for the preparation of the Closing Disclosure
- Set separate appointments for buyer and seller in order to sign documents and deposit funds
- Review documents to confirm that all conditions are fulfilled; request funds from lender
- When all funds are deposited, record documents at the county recorder to transfer the subject property to buyer
- After recordation is confirmed, close escrow and disburse funds, including seller’s proceeds, loan payoffs, real estate agent’s commission, related fees for recording, etc
- Prepare and send final documents and accounting to parties involved
Escrow is complex
One escrow transaction could involve over twenty individuals including real estate agents, buyers, sellers, attorneys, escrow officer, escrow assistant, appraiser, title officer, loan officer, loan processor, loan underwriter, home inspector, termite inspector, insurance agent, home warranty representative, contractor, roofer, plumber, pool service, and so on. In addition, one transaction may depend on the successful close of another sale.
When you consider the number of people involved, you can imagine the opportunities for challenges, miscommunications and delays. For example, loan underwriter is requesting additional documentations from buyer to satisfy the loan conditions and so on.
How much is escrow fee?
Escrow fee is paid to the title company or escrow company for their service conducting the closing of real estate transaction. Typically, the escrow fees is about $600 – $2000, depending on the purchase price. The escrow fee is split between buyer and seller.
How your Realtor can help?
Once your offer has been accepted, your Realtor will facilitate and keep you check for the whole escrow process. Your agent will be responsible for making sure that the seller provides all the necessary disclosures (SPDS) within the time frame specified in your contract. Your agent will insure that you also meet your obligations in a timely manner so as not to jeopardize the closing. Your agent will schedule home inspection, termite inspection and other inspection as needed such as HVAC inspection, roof inspection. Your agent should be present for appraisals and inspections and assist in reading the preliminary title report, inspection report, appraisal report and others. Your agent will write up BINSR, if there is any repair you want seller to repair. Your agent may keep you in check with lender, underwriter to ensure the loan process go through smoothly. All these tasks need to be completed in a timely manner to ensure transaction close successfully.
Swee Ng, Realtor and Phoenix East Valley resident specializing in win-win real estate transaction through great communication and fighting for his clients’ best interest. After all, this is more than real estates, this is about your life and your dreams.
If you are looking to buy or sell your home in Phoenix AZ area, we hope you will consider us. Contact us today for complimentary consultation.
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