I’m sure you’ve heard the word. It may evoke tangled thickets of time, endless forms and lengthy checklists. However you look at it, Escrow is probably the least understood part of the real estate process. At least to the average citizen.
A good definition escrow can be found on its Wikipedia page:
An escrow is a contractual arrangement in which a third party (the stakeholder or escrow agent) receives and disburses money or property for the primary transacting parties, with the disbursement dependent on conditions agreed to by the transacting parties.
The origin of escrow dates back to the year 1600, where it came out of the Latin and French words for “scroll.” The origin comes from the fact that conditions which must be met to disburse money or property were listed on a scroll.
In real estate, the escrow period begins when a seller accepts an offer. The third party (escrow agent) sets forth certain conditions. These lay out how the property will officially and legally transfer from seller buyer.
Finding An Escrow Agent
The first step in the process is to find an escrow agent and open an escrow account. This is a “safe haven” for all deposits, funds and documents completed and accrued throughout the escrow process. The escrow agent must be a third party without any interest in the transaction.
Next, the lender appraises the property, making sure that whatever funds it may decide to loan against the property are secure. You may be unable to come up with enough funds to purchase the property. This is based on your available funds and what the lender is willing to lend. Cancelling the transaction at this point is perfectly appropriate.
Now you have the appraisal in hand and you can secure financing for the property. After you get your loan in place, the seller provides “disclosure.” This means that the seller tells you if anything (to their knowledge) is seriously wrong with the property. These can include problems such as deep termite infestations or foundational cracks.
If there are any significant issues disclosed and you accept them, you probably want a home inspection. This ensures nothing new has surfaced and that the seller correctly represents the state of the property. Under most circumstances, if you are not satisfied after disclosure or the results of the home inspection, you can still cancel the transaction.
Purchase Homeowner’s Insurance
Now that you have financing and you are satisfied with the condition of the property, you need to purchase homeowner’s insurance. You also need a title report and title insurance. These make sure you and the lender are protected from disasters. They also guarantee that no other entity will claim ownership to the property you are purchasing.
The Escrow Process Closing
In the final step you take the final walk through and then close escrow. Closing escrow means that all the documents, financing and monies are in the escrow account, ready to be transferred the seller. The checklist is complete! Each party signs off on all paperwork. The seller receives their monies and the purchaser receives the keys to their new property!
Hawaii Elite Real Estate dedicates itself to making your escrow process smooth and complete. We work with you ensuring that all items are completed. We recommend great local lenders and help you find inspectors to help you with your purchase.
Call us today and begin your Hawaii Real Estate journey. Properties are waiting to be purchased. We are adding inventory every day. Schedule a virtual or in-person showing at your convenience.