Closing Escrow: What Does it Really Mean?

Escrow is a written agreement between the seller and buyer of a property. The moment escrow comes into existence, a third party person, known as an escrow holder, comes into existence. An escrow holder is liable for all the activities executed by both the parties for the purpose of closing the escrow within the desired period of time.

An escrow holder acts as an unbiased personal agent for both parties and collects the funds and documents for the smooth transfer of ownership.  An escrow holder is trusted by both the parties, and carries out his job faithfully.

For the successful closing of escrow, the escrow holder strictly follows the instructions of the escrow deed.  If the conditions of escrow are not fulfilled, the seller can ask the escrow holder not to hand over the documents to the buyer.  And, in the same manner, if the buyer's requirements are not fulfilled, he can also ask the escrow holder to not move the funds.

In some states, attorneys act as the escrow agent or holder.

Closing of Escrow

Closing of escrow can not be completed without the fulfillment of certain conditions. To ensure that both parties are performing according to the guidelines of escrow, the escrow holder inspects the ongoing process on regular intervals.  If there is any lack of performances, by any of the parties, the escrow holder will immediately report this matter to the concerned party, and follow the instructions, as given.

All the expenses related with the escrow are paid by both the parties as decided.  Payment of title insurance, attorney fees, fees for preparing the documents, notary fees, and loan fees are some of such expenses. The payment details are given in the escrow.  All of this is to assure that no disputes arise between the seller and the buyer.

The process of escrow is simple, and can be fulfilled by buyer and seller. But, just because of the nature of activities and involvement of paperwork, keeping an escrow holder is always advisable. Closing of escrow under an escrow holder becomes easy, and all parties involved in the transactions can easily relate their responsibilities with each other to avoid creating extra work, and also to save time.

People to Know in the Real Estate Transaction

When you're thinking about buying a house… there are a lot of people you need to get to know who will assist you along the way. 

This video clip will give you a quick summary of some of the people you'll get to know when buying a home. (runs 4:22)

If you have questions or comments, we'd love to hear from you.  Just click the "comment" link below and fire away.  And don't worry, your privacy is protected with us.  No emails or web site URL's will be divulged here when you leave your comments.

Playing the Housing Slump

Financial lore says you should buy when there's blood in the street — which suggests real estate is a bargain, because there's blood all over the neighborhood right now.

Time to invest?  Now could spell opportunity for this year's buyers.  But what if you already own a home — and have no desire to become a landlord?  Here are three ways to play today's battered housing market.

Trading up.

If you're wanting a larger home or a house in a better neighborhood, this could be your chance to trade up and save big.

To be sure, when you go to sell your current home, you will likely get a modest price. Since 2006's second quarter, real estate has fallen 10.2%, as measured by the S&P/Case-Shiller U.S. National Home Price Index.  But your new, grander house will also be relatively inexpensive, so you're effectively cranking up your real-estate exposure when the market is well below its peak.

Your new home will probably mean not only a bigger mortgage, but also higher ongoing costs, including homeowner's insurance, property taxes and maintenance expenses.  These ongoing costs will offset a large chunk of any future home-price appreciation.

In other words, trading up to a larger home or a better neighborhood is really about wanting to consume more real estate.  Still, like any thrifty shopper, you want to buy when there's a sale — and that is what today's market offers.

As long as it doesn't cut into your ability to accumulate capital for retirement, this is probably a pretty good time to upgrade.

Doubling down.

Instead of trading up, you might be eyeing a vacation home. If you don't plan to rent the place out, the same logic applies: Once you subtract the annual costs from the price appreciation, you likely won't make very much money — which means the property won't be much of an investment.

On the other hand, maybe you're two or three years from retirement and are toying with buying a second home that could become your sole residence once you quit the work force. Does it make sense to purchase now, given the decline in home prices?

Buying today is no doubt appealing, because it'll give you a chance to vacation in your future home. But whether it turns out to be a wise financial move depends on what happens to property prices — and that's tough to predict.

The bottom line: If you think you'll get a lot of use from a second home, go ahead and buy.  But if you view the purchase as a bet on rising home prices, the best advice might be to hold off for now.

Helping hand.

While buying more real estate for your own use probably won't be a great investment, you could help your adult children make good money — by transforming them from renters to homeowners.

To that end, you might give your kids an advance on their eventual inheritance, so they have enough money to make a down payment.  Yes, that means they will start to incur the housing costs mentioned above, including property taxes and maintenance expenses.  But your children will also replace their monthly rent check with a monthly mortgage check, and that will allow them to start building home equity.

Why Use A Real Estate Agent?

In an effort to avoid paying commissions to a real estate agent, many people opt for the for sale by owner (FSBO) route.  While this may seem like an enticing option for most homeowners, the reality can be much darker.

Real estate is fraught with legal complications.  Buying and selling can be quite stressful, especially if you don't know exactly what you are doing.

First of all, real etate agents are trained in all legal matters involved in the sale of real estate.  Sometimes, these sales go smoothly, but sometimes, clauses, liens, and contingency contracts can make them very complicated.  It is hard to know when life is going to throw you curve-balls.  The best thing to do is be prepared, and a real estate agent comes not only trained in theoretical real estate cases, but, ideally, with a whole history of experiences from which to draw from.  This makes them extremely helpful when negotiating the legal aspects of buying or selling.

Even if your home sale goes off without a hitch, all the paperwork involved can be overwhelming.  What are you signing?  Sometimes it's hard to tell when the language is full of legal and industry terms that the average person just isn't familiar with.  Your agent can translate these forms, helping you understand what each step in the transaction is all about.

An agent is connected to a whole network of other agents.  This means that weather you are buying or selling, an agent or broker can help.  They have a network of other professionals to market your home to.  They have clients waiting to buy homes, and colleagues with more clients, waiting to buy more homes.  Some homes barely need to be marketed because there are buyers already waiting to purchase just that type of home.

Many people think they can only find what they need themselves, but a good real estate agent will be able to listen to your needs.  A good agent knows the market, and knows the area, and may be able to suggest places you didn't even know existed.  They are also familiar with local services, and can recommend lawyers, notaries, inspectors or even contractors they personally know do good work.

Overall, an experienced real estatet agent or broker may cost a little in commission, but the service they provide is worth while.  If someone can help you not lose money, or save you a lot of time, aren't they worth what you paid them?

Homes: Rent or Buy?

Owning your own home: an idea so popular it's known as the American dream.  But as prices fall and foreclosures rise, for many it's become a nightmare instead.

How do you know whether renting or owning is the way to go?

Stacy Johnson looks at some ways in this video (runs 1:18).

If you have questions about whether your particular financial situation would make it better to rent or buy, contact us.  We'll help you determine which is right for you.