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Message # 924 Escrow

mp3 #924 What is Escrow (mp3 file)

If you have ever bought or sold a house, you probably have come in contact with the term escrow. In some states, the "escrow" process is necessary before a house or property can exchange hands. This message will define an escrow, and it will explain what an escrow does during the sale of property.

An escrow is basically a person or company who acts as a neutral third party and holds property or money involved in a transaction between two persons until all escrow conditions are met. Sometimes we say a transaction is "in escrow," meaning the papers are being held by an escrow. When land, houses or other such property is involved, the escrow holds a deposit of money until the legal title to the land can be transferred. An escrow also holds the deed to property until the buyer deposits the money needed to complete the purchase. Escrows are customarily used when a person or persons are selling or buying real estate.

An escrow does not work for only one side in a sales transaction. An escrow acts as a neutral third party, helping both sides by carrying out instructions to successfully complete the sales transaction. If a problem, such as a disagreement over price or terms, arises, the escrow may only inform each party of the problem and wait until the parties mutually agree on how to proceed. If the disagreement cannot be solved in a reasonable time, the escrow may choose to file all documents and money with the court, and withdraw from the case. In such cases, the two parties then must go to court to solve the problem.

If an escrow decides to file documents and money with the court because an agreement cannot be reached, it can charge the parties reasonable fees for its time and effort. If an escrow is cancelled by mutual agreement of both parties, the escrow office also is entitled to reasonable fees for its services, and for costs of obtaining preliminary ownership reports on real estate, and other services rendered by an escrow.

In choosing an escrow to act as a neutral third party in your transaction, you should be sure that the escrow is legally entitled to act in California. If you are buying a house, the real estate broker may recommend an escrow. Since escrows depend on brokers for referrals, if you have any doubts about the neutrality of the escrow, you and the other parties may want to choose another mutually acceptable escrow to handle the transaction.

If the buyer or seller, for any reason, does not understand any part of the transaction, he or she should seek independent advice from experts such as attorneys or accountants. The escrow is not qualified or legally able to perform the functions of these experts. Determining the property values, legal consequences or tax advantages requires specialized expert help, and the escrow cannot provide help or advice in these areas.

When an escrow completes the transaction (sometimes called closing the escrow), escrow will send you a closing statement which accounts for all the money deposited in escrow. You should discuss any questions you have about this statement with the escrow, and make certain you receive all documents and money to which you are entitled.

It is important to know that escrows usually are not lawyers. If you are involved in a complicated or unusual transaction, it might be wise to obtain legal assistance. An attorney, given all the papers you have on the transaction, can advise you on the legal problems that may need to be resolved.

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