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5 Key Roles Of An Escrow Officer
Various (if not all) industries use escrow services for safer transactions when dealing with both businesses and consumers.
It is basically using a third party to obtain control of critical items of a transaction like money and documents, and release them to the parties who would properly own them after a transaction.
If we take a real estate transaction for example, buyers might fear that they would not obtain ownership of a house after they have paid the money. Escrow eliminates such worries.
Sellers might worry about not getting the money they were promised after relinquishing their title. Escrow serves to alleviate exactly such circumstances.
This is why escrow is a critical phase of closing in real estate.
It is one of those services where we seldom appreciate the value of. And often complain about the extra fees that need to be paid.
However, we often fail to recognize the peace of mind this service offers to all parties involved in a transaction.
So before you start questioning an escrow officer sarcastically about the value he adds to the value chain, take note of the following key roles he plays.
1) Title information
The escrow officer is one of the few players in a transaction that have genuine expertise in scrutinizing titles to ensure ownership is in the right order.
If you are depending solely on the title company or an attorney to do this part for you, be aware that human errors can occur.
Having a backup inspector to go through the title will double up your protection from any title problems in future.
If there are parts of a preliminary report (prelim) which you don’t fully understand, an escrow officer should also be able explain them to you.
2) Mortgage information
If you are buyer, one of the key tasks that your team have to be effective in is identifying all liens tied to it. Especially the mortgage(s).
You don’t want to acquire a property and realize that it still has an outstanding mortgage of $100,000 that wasn’t paid off after your purchase.
An escrow officer should be able to easily obtain information regarding these. And get reliable information about outstanding loan balances with instructions on how to settle them at closing.
The grant deed is a document which officially transfer legal title to a buyer.
It requires endorsement from the seller and is usually recorded when escrow closes.
If you are a seller, it is critical that you do not approve a transfer before all the terms and conditions of the agreement has been met.
This is the primary reason why you need an escrow in the first place. So that you do not get tricked into a scam!
So make sure you provide clear instructions to the escrow officer about what to do and when to do it.
4) Proper allocation of funds
To ensure that the proceeds of a sale is channeled to the correct places, the escrow officer holds the funds and make arrangements for payments required for closing.
For example, using proceeds to payoff an existing mortgage and other loans with the house as collateral.
This is so that a buyers is not left holding a bag of liabilities which the seller is supposed to settle with the proceeds of the sale.
At the same time, if you are a buyer, you’d want the peace of mind that your money is not deposited into the seller’s account until the terms and conditions of the transaction have been met.
5) Closing statements
For proper filing and documentation, which can be important for companies, an escrow officer would also prepare accounts stipulating the details of money coming in and going out of the escrow account.
This is so that you know exactly where the money is going and coming from.
You can also get an estimated closing statement which you can use to plan out your budget.
All in all, every player in the real estate transaction process add value to the value chain.
While many of the professionals involved in the process can seem redundant, rest assured that they are there for a reason. And any missing link can present grave problems in the future for the property in question.