Thursday, November 8, 2018 / by Thea Limon
You may be asking yourself what does escrow mean and how does it work? Escrow is opened usually right after an accepted offer with a neutral third party that will then hold onto a buyer’s earnest money deposit until the deal has closed. A local Realtor in Lake Arrowhead could help you by breaking down the entire process, one key factor at a time.
That is precisely how we’re going to help you as well. Before you buy or sell your home, be positive that you are confident in your Lake Arrowhead Realtor! A real estate agent in Lake Arrowhead has to have enough real estate experience to understand each part of the process thoroughly.
A great tip is to hire a full-time agent because they have more experience and devote their time entirely to real estate, giving you the extra motivation to use them because they will be more focused on selling your house or helping you to find your dream home!
What is the purpose?
The purpose of escrow is to help everyone to feel at ease because it gives assurance to the seller and buyer that there is no bias. Escrow guarantees that the property and funds will not be traded until everything has been signed, the transaction is complete and records properly on the title, it gives everyone peace of mind and protects everyone involved.
An earnest money deposit is given after a buyer’s offer is accepted on the house to show their good faith to the seller and show that they are serious about purchasing. The buyer’s earnest money doesn’t go to the seller but to a third unbiased party. They do it this way, so the seller doesn’t have the earnest money while negotiating with the buyer and use it as a negotiation tactic.
It’s the same for the buyer. The buyer won’t have the deed to the house until after it’s been paid for. If the buyer had the deed before everything was signed, they could use that as a ploy to negotiate their terms.
Who is involved?
In a real estate transaction, there are more people involved than the buyer and seller. Who else is involved in the escrow process then? This can vary depending on the state you live in, but in California, you have the buyer, seller, escrow office, and the real estate agent.
If an offer is accepted, then the real estate transaction goes into escrow. Their local real estate agent will help them to negotiate the transaction at this point.
For example, if a home inspector says that the roof needs to be fixed and states that it is a major issue, then the buyer can place a request for repairs that says the roof must be fixed before the transaction is official. If the seller agrees then the transaction can continue but every house is sold as is and all repairs are negotiable. If you’re buying a Lake Arrowhead home, it’s ideal to have a local Realtor to help navigate all these different terms and hurdles.
At the end of the escrow process, the buyer is officially a new homeowner!
The seller’s real estate agent discusses the contingencies and contract details with the buyer’s Realtor until everyone has come to an agreement. Once the seller accepts an offer, the escrow process is a go. The escrow officer helps to protect both, the seller and the buyer, by collecting the earnest money deposit. This shows the seller that the buyer is serious about the offer. Typically, the earnest money deposit is 2% – 3% of the offered amount.
Once all the paperwork has been completed, all contract details/contingencies have been satisfied, and it’s gone through the escrow officer, the home is in the “clear to close” stage, meaning you are about to sell your Lake Arrowhead home officially!
Wait! You may be wondering what happens if a buyer backs out for the reason that isn’t accepted in the contingencies? The seller may keep their earnest money deposit. This is a safeguard to make sure that a seller doesn’t have to go through the process of escrow for nothing and having it cancel.
A mortgage lender approves a Lake Arrowhead home buyer from a loan based on their income, finances, and credit information. They are involved in the escrow process if the buyer is using a loan to pay for the house rather than cash.
A lender’s responsibilities are to evaluate loan applications and making sure it’s complete, running the borrower’s credit to check their credit standings, inform the borrower of different rates and loan programs, and communicating between the underwriters and borrowers.
4. Lake Arrowhead Realtor
On both the buyer and seller side, they should have a local experienced Realtor to help them navigate through the real estate transaction. With years of going through the escrow process, they are your best support system. Local real estate agents can give you a little insight
Realtors are responsible for purchase agreements, closing documents, overseeing documents being signed, and negotiation between both parties. Take the load off your shoulders and let them deal with the paperwork to ensure that everything is handled correctly.
5. Escrow Officer
As a buyer, when you place an offer on a home, an earnest money deposit is required to put the home buying process into escrow. It shows the seller that you are serious about your offer because there is a chance that you could lose your earnest money deposit, depending on the real estate contract and contingencies.
An escrow officer is a third party that is impartial to both the seller and the buyer, they hold onto the deposit and confirm that everyone has met their part of the contracts before the funds are given to the seller.
Escrow officers also provide all required documents on taxes and the escrow to mortgage holders for tax purposes. They review regulatory documents and are in charge that the transaction complies with the law.
Each state has different laws or requirements when it comes to real estate; it’s essential to find a local escrow officer and Realtor for the overall Lake Arrowhead home buying or selling process. At the very final state, the escrow officer clears the title, meaning that the buyer officially owns the home.
Closing of Escrow
Both parties receive all the final paperwork at the point of closing escrow. Make sure to read over all the paperwork carefully! You won’t be able to change anything once you have signed and submitted your documents at the closing of escrow. Once everyone has completed their portions of all the closing paperwork, the escrow officer will then create a new deed naming the buyer as the property’s owner and send it into the county’s recorder. The seller will then receive all the funds for selling the house.
Congratulations you have sold or bought a Lake Arrowhead home!