JMAC’s brokers are watching rates shoot down and then back up again, the Republican convention, and violence around the world. Who cares about a primer on escrow? Well, we do, and as we see our brokers add staff we feel it is important that they and their clients know as much about the process as possible. JMAC AEs help their brokers help their clients with financing, but we’re all also exposed to buying and selling properties as well as the real estate transaction or the escrow process.
In the case of a real estate transaction, escrow, or settlement agent, is a third party that buyer and seller use to transact funds from one party to the next. In a refinance situation, the two parties would be the borrower and lender. Escrow is “neutral” and has no agency contract with either buyer or seller – the contract is with the transaction.
For example, the Roses are selling their home to the Lillys. They have reached an agreement to price and terms of their transaction. At this point, an escrow account is opened with Josephine at the escrow company. Josephine is now the agent of the transaction representing the agreement between the Roses and the Lillys.
If the Lilly’s wish to make a change to the agreement, for instance a $2,000 credit to them to off-set some repair costs discovered during their home inspection, they notify Josephine at the escrow company. Josephine cannot just change the terms of the transaction. She first must get consent from the Rose’s for the credit. Once both parties agree to any changes, then Josephine can amend the transaction.
JMAC’s experienced brokers remind their clients that escrow plays a vital role in real estate transactions by ensuring the initial instructions are followed and that neither party changes the transaction without the consent of the other. At closing, escrow is responsible for disbursing funds to all the parties and services involved in the transaction such as fees owed to the pest company, title, the lender and themselves. They also payoff any liens currently on the property such as the seller's mortgage or tax obligation. Escrow then transmits the net proceeds to the seller. And after the loan is closed through JMAC, escrow provides a detailed account of all funds received and disbursed to all parties.