Upon a buyer and seller agreeing to the terms in a purchase contract, they will immediately open escrow. Escrow is related to the impartial third party who helps to facilitate the transfer of ownership (aka title) from the seller to the buyer.
The escrow company will handle the earnest money from the buyer. They will run a title check on the property to ascertain if there are any encumbrances upon the property that the buyer should be aware of. An encumbrance is basically a hindrance to owning the home fee-simple. This can be in the form of any existing mortgages, assessments, or even a lis pendens (law suit) against the property itself.
An escrow company will also prorate and figure out any applicable property taxes, hoa fees, and work out the settlement statement between the parties. This is where the “impartial third party” comes in, as they will be facilitating how these fees are split up, handled, and will work with the lender (if applicable) to get these funds transferred over safely.
Lastly, they will work with the County Assessor to successfully record ownership and close out the transaction. The bottom line is that the escrow company is responsible to make certain that there is a fair and seamless transition of ownership – which is integral to every real estate deal!
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