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Almost all real estate transactions are processedthrough something called an "Escrow". But what theheck is that?

Escrow is a neutral party that holds funds, acts upon documents and follows the instructions of the parties to a real estate transaction.

The escrow holder takes written instructions from sellers, buyers, lenders, inspectors and others.
Those instructions define the terms and conditions under which the transaction will be completed.

In most states escrow can only be handled by a licensed corporation or an attorney. In some areas most escrows and transaction settlement are handled by the same company the writes the title insurance.

Escrow reduces the risk to both buyer and seller.

The Escrow Company, Title Company or Attorney Acts as:
- A custodian for funds and documents.
- A clearing house for payments of all demands.
- An agency to perform the clerical details between parties.

A title insurance company issues a preliminary title report that shows the ownership details of a specific parcel of land and lists title defects, liens and encumbrances.

The report might also show recorded restrictions which have been placed in a prior deed. The report can also show details of any covenants, conditions and restrictions (CC&Rs)
contained in a prior deed. These can limit the use of the property.

The report gives the buyer the chance to ask the seller to remove any item disclosed in the preliminary title report that he finds objectionable prior to purchase.

Title insurance is real estate ownership insurance.
It insures an owner's rights and interests. Title polices are issued to both the buyer and the lender.

An Escrow Officer's Responsibilities include:
Reviews preliminary report Provides copies of preliminary report to all parties Receives and prepares seller's & buyer's escrow instructions Receives buyer's funds for escrow Arranges hazard insurance with buyer Complies with lender's instructions Arranges new loan funding with lender Prepares documents and special instructions Records documents with county recorder Disburses monies and documents to the appropriate parties Prepares final closing statements for buyers and sellers Issues title insurance policy.

It is good practice to read every document you will besigning before the day of closing. You can arrange this withyour escrow officer. Make notes of everything you don't understand and ask the escrow officer to explain.

During peak home selling periods escrow holders are often swamped with work and miss the scheduled closing date by a fewdays. If you plan on that happening it won't be a problem.
About The Author Mark Walters is an investor and author. You can find his published material at http://www.CashFlowInstitute.com http://cfiblog.blogspot.com/