Securing the Real Estate Transaction

Real estate transaction usually involves transferring large sums of money. It is imperative that the funds and related documents will be transferred from one party to another be in a neutral, secure, and experienced party. Therefore, the deposit custody process was developed for the protection of the buyer, seller, and lender.

What is Escrow?

You will hear the word “escrow” often during the process of buying your home. This is money saved by an independent entity during a transaction.

Who is the independent entity that keeps the money?

In many states, the escrow agent is a licensed agent within a title insurance company. Some states require that a lawyer be the custodian for a real estate transaction, while other states such as California have differentiated deposit service companies that handle the closing of the real estate operation and the distribution of the funds.

Where is the money saved?

In the case of a real estate transaction, the escrow agent or agent in charge of the deposit has a deposit account where he keeps the money for the transaction. The amount includes his down payment of the property, the funds you provide for cover the closing costs and the disbursement of the bank of the money corresponding to the mortgage. These funds are stored in the account until the transaction is completed. Eventually, the deposit service agent distributes the funds to all parties involved in the transaction.

How will the guarantee funds be used?

The mortgage lender will give detailed instruction to the escrow agent on what should be paid at the time of closing.These payments could include:

  • Payment of all existing mortgages
  • Payment of all existing judgments or liens
  • The payment of the balance of the sale price, once the mortgages have been paid, to the former owner
  • Fees and commissions of real estate agents
  • Mortgage fees and commissions
  • Closing Costs
  • Title and Homeowner’s Insurance and Mortgage Insurance
  • Taxes
  • Registration Fees

What other obligations does the depositor closing agent have?

In addition to handling the money for the transaction, a custodian or closing agent often handles working with you, the seller and your real estate agent, and your mortgage bank to ensure that all necessary documentation for the closing package has been submitted and is complete.
The agent often supervises the closing process, explaining each of the documents and presenting them to you for signature.

When all documents have been signed, and the transaction is complete, the closing agent provides you with copies of those documents and delivers to the lender a complete mortgage package containing all these documents.

Also, the agent records all pertinent documents with the county registrar’s office. The agent will also prepare a statement for all parties detailing the disbursement of the funds and requests the issue of the title policy.

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