What Is An Escrow?

When opening an escrow, the Buyer and Seller of a piece of property establish terms and conditions for the transfer of ownership of that property. These terms and conditions are given to a third party known as the Escrow Holder. The Escrow Holder has the responsibility of seeing that the terms of the escrow are carried out. The escrow is an independent neutral account and the vehicle by which the mutual instructions of all parties to the transaction are complied with.

How Does The Escrow Process Work?
The escrow is a depository for all monies, instructions, and documents necessary for the purchase and sale of a home. These include funds for down payment, lender’s funds, and documents for the new loan. Generally, the Buyer deposits a down payment with the Escrow Holder, and the Seller deposits the deed and any other necessary papers with the Escrow Holder. Prior to close of escrow, the Buyer deposits the funds required and agreed upon by the parties to the sale with the Escrow Holder. The Buyer instructs the Escrow Holder to deliver the monies to the Seller when the Escrow Holder:
  1. Records the deed, and
  2. Delivers to the Buyer a policy of title insurance which shows title to the property vested in the name of the Buyer.
The Escrow Holder is authorized to deliver the deed to the Buyer when the Buyer has deposited the agreed-upon purchase price and fulfilled any other conditions specified in the escrow instructions. The Escrow Holder handles the prorations and adjustments on any fire/hazard insurance, real estate taxes, rents, interest, etc…, based on the escrow instructions of both parties.

The Escrow Holder thus acts for both parties and protects the interests of each within the authority of the escrow instructions. Escrow cannot be completed until the instructions have been satisfied and all parties have signed escrow documents. The Escrow Holder takes instructions based on the terms of the Purchase Agreement and the Lender’s requirements.

What is Title Insurance?

The purchase of a home is probably the single largest investment you’ll make in your lifetime. It is only prudent that you want to safeguard your rights and investment. Title insurance assures that your rights and interests to the property are as expected, that the transfer of ownership is smoothly completed and that you receive protection from future claims against the property. It is the most effective, most accepted and least expensive way to protect your ownership rights.

Because land endures over generations, many people may develop rights and claims to a particular property. The current owner’s rights – which often involve family and heirs – may be obscure. There may be other parties (such as government agencies, public utilities, lenders or private contractors) who also have “rights” to the property. These interests limit the “title” of any buyer.

Before your real estate transaction closes, the title company performs an extensive search of all recorded documents related to the property. These records are then examined by experienced title officers to determine their effect on the current status of ownership and a report is issued to you or your agents for review. This thorough examination generally allows any pending title problems to be identified and cleared prior to your purchase of the property.

If title insurance companies work to eliminate risks and prevent losses caused by defects in the title before the closings, why do you need a title insurance policy?

Because even after the most careful research, some title flaws may go undetected. Among the more common flaws to title which are not of record are forgery, invalid court proceedings, mistaken legal interpretations, defective deeds, confusion due to similarity of names, previously unrecognized rights of spouses and undisclosed heirs. These problems may surface at any time in the future.

Protection against these flaws and other claims is provided by the title insurance policy which is issued after your transaction is complete. Two types of policies are routinely issued at this time: an “owners policy” which covers you, the homebuyer for the full amount you paid for the property; and a lender’s policy which covers the lending institution over the life of the loan. When purchased at the same time, you can obtain a substantial discount in the combined cost of an owner’s and a lender’s policy. Unlike other forms of insurance, your title insurance policy requires only one moderate premium for a policy to protect you and your heirs for as long as you own the property. There are no renewal premiums or expiration date.

Each policy is a contract of “indemnity”. It agrees to assume the responsibility for legal defense of your title for any defect covered under the policy’s terms and to reimburse you for actual financial losses up to the policy limits.

For more title info contact Team Langgle at Corinthian Title Co. and let them know University Realty sent you.