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Buyer's Guide - What is Escrow?

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What is Escrow?


Escrow is a process by which a complex sale, exchange or loan transaction involving real property is brought to completion.

The word "escrow" derived from the Middle French word escroue meaning scroll, the form of most documents in those early times.  The word has stayed with us since!

Once the Home Buyer and Home Seller reach an agreement regarding the condition of sale, they arrange for a neutral third party (in Northern California-usually a Title Insurance Company) to hold their funds and documents of transfer - such as deeds - until all the required elements of the deal have been fulfilled.  While the funds and documents are held pending conclusion of the deal they are said to be "in escrow," the transaction is said to be "in escrow," and there is "an escrow."

You can look at an escrow as a "clearing house" of all the activities which requires any type document and/or any amount money to process from one person to another through the neutral third party escrow company.  The escrow company keeps a close eye on all matters and makes certain that anyone who needs to perform does so in a timely and complete manner.

The escrow company does not carry any power of its own.  For instance, the escrow company cannot demand that any party perform.  However, the escrow company can request for the performance of any matter and must then simply wait until it is performed.  However, an alert real estate agent will be in close contact with the escrow agent checking to make certain the other party is performing as agreed upon in the escrow instructions.

The escrow time period is usually agreed upon by both Buyer and Seller.  The shortest escrow period is usually 30-days.   However, if agreed upon, escrow can be upto 90-days or more.  It is simply an agreement between Buyer and Seller.


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