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What is "escrow" and what does it mean to buyers and sellers?

Escrow is a process that begins when the purchase offer papers are signed by both parties, and ends when the loan is approved and all the necessary requirements have been fulfilled by both the buyer and the seller. The escrow holder is an intermediary, and an agent of both the buyer and seller. The escrow holder is given the buyer's deposit, and holds onto all funds until the agreement is finalized. They notify the seller when the deposit has been received and if the check has cleared the bank. The escrow holder also draws up a set of instructions, itemizing things that have to be done to the property before it is sold and the title is transferred. For example, if the seller is required to supply a termite inspection, the escrow holder would track this obligation and make sure it is fulfilled before any funds are transferred to the seller. Findings in the termite inspection report must be corrected on or before the close of escrow. If the report calls for a plumber, roofer or other contractor, the agent would advise the seller and get authorization for work to be done. The escrow company also interacts with the title company. The escrow holder receives a complete ownership history of the property and any liens on record in the preliminary title report. Anything that is out of the ordinary, such as condo liens, judgments, etc. against the buyer and the seller must be clarified prior to the sale of escrow. The escrow process can be any number of days depending on what is agreed upon between the buyer and seller. To assure a timely closing, the buyer should do things like, inform the escrow holder of the name and phone number of their insurance agent as soon as possible. The homeowner insurance policy needs to be ordered early, so verification can be made with the lender. The lender will not fund a new loan without a homeowner policy. If there is a delay, the escrow process may be held up.

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