What is ESCROW? | Everything you need to know

by | May 14, 2021 | Real Estate Insight | 0 comments

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In this Video, I will be explaining what is and escrow and how the escrow process works when buying a home. Great information for first-time homebuyers and real estate agents

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Full Transcription Below:

Andrew, what is Escrow?

Escrow is kind of like your mom on your birthday when you’re

a kid.

So when you’re a little kid opening up all your envelopes

and birthday cards, you start having all this money fall

out on your lap, and you start just gathering it and handing

it to your mom because you don’t want to lose it.

Right.

And your little kid all you want toys anyways.

So you give all the money to your mom and she takes care

of it.

And then when the time comes, you ask for and she gives it

to you.

So what happens is when you get into contract to buy a house,

you put your deposit, and that all goes into an Escrow account.

So they actually cash your check, hold it into a separate

account that the sellers have no access to.

And then at the very end, once it’s all set and you’re ready

to close, then they give the money to the seller who decides

on the Escrow company.

So typically the buyer gets to decide what company to use.

But in most situations is one of the agents, either the listing

agent or the buying agent.

What are the typical Escrow costs?

It kind of depends on the loan amount.

So one of the questions they ask right away is what’s the

loan amount?

And then they base it on that, because basically it’s part

of insurance.

So they’re ensuring the lender based on the loan amount.

How do you initially pay for Escrow?

How do I start?

Well, everything’s included.

So they give you a very itemized statement where all the

fees are going.

But when you first open up Escrow, you’re basically putting

in it’s called the EMD, which is like an earnest money deposit.

And then basically it’s like, all encompassing.

So that money is going towards the whole how much is that?

Typically the EMD, it doesn’t have to be much.

It could be 1,000 dollars, 5,000 dollars.

But for a very strong offer on a home, you’re looking at

3% of the purchase.

Right.

Got it.

Is that refundable?

What does that look like?

Yeah, it’s refundable.

Up to a point in my whole career, I’ve never lost anyone

to deposit.

But once the buyer releases all their contingencies, which

are inspection, appraisal loan, at that point, it becomes

non refundable, I guess, paying the rest of Escrow.

What does that look like?

After your lender send in your final documents to the title

company, they put together an estimated closing statement.

And then once you have that figure, you can either wire in

the money or do a cashier’s check.

Got it.

What are the different ways you can pay?

Most of the time it’s going to be a wire through your Bank.

But in some cases, you can just do a cashier’s check.

Can I have anyone pay?

Or can it come from a random Bank account or everything has

to be tracked and kind of paper or trailed, but it can come

from multiple places.

So I have a lot of first time buyers that their parents help

them out.

Or it could be like an aunt or an uncle.

And so they can actually wire in part of the money part or

all of the money, depending on what loan program.

What’s the typical open close timeline?

Like, how long is Escrow?

What does that look like?

Yeah.

So the common phrases you hear is like open escrow, closed

escrow. So once you have a ratified contract between the

buyer and seller, the buying agent is supposed to open up

Escrow within three days and put in the deposit.

And then once everything is settled out and everyone has

been paid, they basically close the file and then Escrow

is closed.

How long does that usually take?

The typical 30 days could be a little bit less or more.

If it’s all cash transaction, that’s usually less, maybe

10 to 15 days.

Those cash buyers, when do I get the keys?

Are the most important part is when do we get the keys?

Yeah.

Another common term is funded and recorded.

Right.

So most of the time it happens on the same day, but there

are cut off times.

So it can be possible where your loan will fund on one day,

but not be able to record with the city until the next day.

So you technically can’t take possession of the home until

it’s legally in your name.

And even though you put your money in Escrow, they have to

wait until it’s been recorded.

So after it records.

Right.

Okay.

That’s typically, like 30 days.

Or what does that look like?

From start to finish, you’re looking at about 30 days.

So something kind of cool right now that’s been happening.

They call it a table funding before, years ago, you’d have

to sign your final papers.

Then they would mail it to the lender for a review, and then

they would initially initiate the funding.

Now they can just get an email.

So you can literally have someone sign on a Friday.

They email over the final papers, and the Bank will fund

it, and they’ll be able to record it all the same day.

When is my first payment on the house after I get the keys?

It kind of depends on the date on the loan documents typically,

like, right now, we’re doing this in March.

So if the documents were in March, your first payment would

be in May, right?

Around 45 days.

Just depending how do I find a good for company or what should

I look for?

In my experience, I’ve worked with, I would say all of them,

and they’re all pretty good.

So the people that do these jobs, they’re kind of like the

hub of the whole transaction.

And so they start early, they work late, and they’re very

organize professionals, the Escrow agents, and typically

they have one or 2 assistants as well.

So you can always get a hold of somebody.

They keep everything very detailed.

Who’s?

Some people in your area that you recommend.

I work with Fidelity First American title.

And like I said, they’re all good.

It’s just all based on relationships as well.

Everyone has different personalities, but they’re very helpful.

Awesome.

Well, thanks for explaining escrows to us.

We’ll have to dive in even more next time.

Yeah, Let’s do that.

Okay.