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.
1. What Title Companies Do
Title companies make sure a title is clear of any and all encumbrances. This includes liens, 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.
2. What Escrow Agents Do
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.
3. How to Find Good Agents
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.
4. How to Find the Best Deal
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:
- Ask for a list of title and escrow costs. Check on everything from escrow service fees to title search and insurance premiums.
- Determine whether the buyer or the seller pays the fees.
- Be aware of title and escrow discounts available for refinance-related transactions or sales that include the same lender and title and escrow services.
- If the initial quote seems low, watch out for incidental fees likes wire transfer, copying, courier and fax fees. Those smaller items can add up.
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.
Written by Darren Wilson at The Realty Firm