Once you’ve found the home of your dreams and joined and have an agreement with the seller, there’s still one more step to complete. That final step is the escrow process, also referred to as closing. Your real estate agent, lender, title agent and closing agent will guide you through the process, but you should also be aware of what’s taking place. Here’s what you need to know to better understand the escrow process and get the best value.
1. Why do I Need a Title Company
Title companies make sure a title is clear of any and all encumbrances. This includes liens, judgments, property tax, forgeries, fraud and anything else that must be cleared before the deal goes through. After the title company deems the title clear, it issues an insurance policy (title insurance) to protect the buyer and lender from claims and disputes over the property that may occur in the future.
2. What does the Escrow Agent Do?
Escrow services provide a neutral third-party agent or officer who handles title and escrow work, financing, transaction instructions and other paperwork related to the home purchase, mortgage refinance or other title transfer. Escrow officers are there to safeguard documents, process and follow instructions to make sure everything is filed timely. They’re not there to provide advice to buyers. But, if closing is taking too long, you may want to reach out to the escrow officer to see if there is anything you can do to expedite the process. They may be able to point you to the contact to speed up your process.
3. How to Choose your Escrow Company/Agent
Escrow is a relationship business. Your broker will typically recommend an escrow officer whom he or she has successfully worked with in the past. Important factors to consider are the level of experience of the individual who will be acting as the escrow officer, the financial strength and stability of the company and the price charged for escrow services. Consider finding an office conveniently located near you to save time.
Fees vary, so you can do some comparison shopping:
Ask for a list of title and escrow costs (one should be provided from your lender when purchasing).
Determine whether the buyer or the seller pays the fees. In Southern California the buyer and seller customarily split the cost of escrow services. The seller usually pays for the Owner’s Title Insurance and the buyer for the Lender’s Title Insurance.
If the initial quote seems low, watch out for incidental fees likes wire transfer, copying, courier and fax fees. Those fees should disclosed on your initial estimate of fees.
Keep in mind, title and escrow services don’t dictate fees related to the home loan. While all fees—title, escrow, lender and more—show up on the Final Closing Disclosure or Final Settlement Statement (known as the CD document), lender fees will be generated by the lender. Escrow is responsible for the Escrow fees only.