Once you’ve found the home of your dreams and joined the seller in a hearty handshake, there’s still one more step to complete.
That final step is the escrow process, also referred to as closing.
While your real estate agent, lender, title agent and closing agent will guide you through the process, that doesn’t mean you should be unaware of what’s taking place.
Here’s what you need to know to understand escrow and get the best deal.
Title companies make sure a title is clear of any and all encumbrances. This includesliens, judgments, forgeries, fraud and anything else that must be cleared before the deal goes through.
After the title company deems the title clear, it issues an insurance policy (title insurance) to protect the buyer and lender from claims and disputes over the property that may occur in the future.
Escrow services provide a neutral third-party agent or officer who handles title and escrow work, financing, transaction instructions and other paperwork related to the home purchase, mortgage refinance or other title transfer.
Escrow officers are there to safeguard documents, follow instructions and make sure everything is filed timely. They’re not there to provide advice to buyers. But if closing is taking too long, you may want to reach out to the escrow officer to see if there is anything you can do to expedite the process.
Your real estate agent may suggest a closing agent, but you can also seek referrals from family members, friends, co-workers and other professionals you trust. You want a referral to the title or escrow officer—not the company.
The officer should be familiar with the type of home you are buying, especially if it’s a condo, multiplex or historic home. You also want to find an office conveniently located near you to save time.
Many home buyers aren’t aware they can shop for title and escrow services. While lenders will suggest companies, you don’t have to go with their recommendation.
Fees vary, so you can do some comparison shopping:
Keep in mind, title and escrow services don’t dictate fees related to the home loan. While all fees—title, escrow, lender and more—show up on the final settlement sheet (known as the HUD-1 document), lender fees will be generated by the lender.
Updated from an earlier version by Broderick Perkins.