What is and what happens in Escrow
What is a Loan Appraisal?
Once the contract is ratified,
that is all of the negotiation points are agreed upon and both you
sign the final contract and the seller and copies delivered, itís
on to escrow.
The escrow companyís job is to act as a neutral third
party for both you and the seller. They hold all of the money that you
provide and the clear title that the seller effectively provides by
signing the contract. They make sure that all of the terms of the
contract are met and that everyone gets paid what they are due. This
includes the pest inspection company, the appraiser, lender fees, any
inspectors, title insurance, us as your agent, the seller's agent if
any, etc., with the balance of the funds going to the seller as
payment for the transfer of the deed.
One of the key activities that take place in escrow is the
researching of the title. The Title Insurance Company does this, which
here is most often the Escrow Company as well. The purpose is to prove
to you and the lender that the seller has clear title to the property
and that is not encumbered by any liens nor has other problems that
cloud the title. If the title is clear, the Title Company commits to
insure both the Lender and you should any covered problems be
discovered after settlement.
Both rely on the Title Company to carry out faithfully their
mutually consistent instructions relating to the transaction and to
advice them if any of their instructions are not consistent or cannot
be carried out. Very simply defined, an escrow is a deposit of funds,
a deed or other instrument by one party for the delivery to another
party upon completion of a particular condition or event.
An escrow is important in that both can move forward separately but
simultaneously in providing inspections, reports, loan commitments and
funds, deeds and many other items, using the Title Company as the
central depositing entity.
If the instructions from all parties to an escrow are clearly
drafted, fully detailed and mutually consistent, the Title Company can
take many actions on their behalf without further consultation. This
saves time and facilitates the closing transaction.
One of the final, but critical tasks for you to accomplish before
closing is to arrange for homeowner's hazard insurance and flood
insurance if required. Before closing you will need to provide to the
Escrow Officer evidence that you have obtained this insurance .I will
provide you a list of various insurers if you wish.
instructions to the Title Company
The method by which the Title Company is to receive and hold the
purchase price to be paid by the buyer.
The conditions under which a lapse or breach of purchase contract
provision will terminate the escrow without a closing.
The instruction and authorization to the Title Company to disburse
funds for recording fees, title insurance policy, real estate
commissions, and any other closing costs incurred through escrow.
Instructions as to the proration of insurance and taxes.
Instructions to the title company on the payment of prior liens and
charges against the property and distribution of the net sales
The duties of the Title Company
Opens the order for title insurance (provided by seller to buyer at
Obtains approvals from the buyer on the Preliminary Report, pest and
Receives funds from the buyer and/or any lender.
Prorates insurance, taxes, rents, homeowner
association fees, etc.
Disburses funds for title insurance, recording fees, real estate
commissions, lien clearance,
on home , etc.
Prepares a final statement for each party,
indicating amounts to be disbursed for services and any further amounts
necessary to close escrow.
Records deed and loan documents, delivers the deed to the buyer,
loan documents to the lender and funds to the seller, closing the
Closing Whether you are a first time home buyer or season buyer
you will find useful information here.
WHAT IS AN APPRAISAL?
If you've ever watched "Antiques Road show"
on PBS, you're already familiar with the concept of an appraisal. The
idea is similar in the realm of real estate valuations. Each property
is unique, and the appraiser relies on his or her general expertise
and specific research to arrive at an opinion of value. Appraisals are
an infrequent experience for most consumers, who consequently tend to
have some misconceptions about the process and the results.
An appraisal provides valuable information for the buyer and the
seller, but the appraiser's primary mission is to protect the lender.
Lenders don't enjoy owning overpriced property any more than they
relish lending money to irresponsible borrowers. That's why the
appraisal takes place before the lender grants final approval of the
Again an appraisal is an opinion of value or the act or process
of estimating value. Using the three common approaches, all derived
from the market derives this opinion or estimate. They are:
1. Cost Approach to value is what it would cost to replace or
reproduce the improvements as of the date of the appraisal, less the
Physical Deterioration, the Functional Obsolescence and the Economic
Obsolescence. The remainder is added to the Land Value.
2. Comparison Approach to value makes use of other "bench mark"
properties of similar size, quality and location that have recently
sold. A comparison is made to the subject property.
3. Income Approach to value is of primary importance in ascertaining
the value of income producing properties, has little weight in
residential type properties. This approach provides an objective
estimate of what a prudent investor would pay based upon the net
income the property produces.
When they inspect a home for an appraisal, the
inspection is really the "tip of the iceberg" of the work
they do. Before they go to the house, they research public records
information, get a plat map, check the zoning and flood data, and
printout sales and listings of similar homes. During the inspection,
they make a drawing of the home and other improvements such as a
swimming pool and make notes on physical characteristics such as floor
coverings and built in appliances. They check the site boundaries
against a plat map. They look at the adjacent properties. After
completing the inspection, they select comparable sales and listings
and take photos of them. Back at the office, they contact real estate
agents for more information on the sales terms, condition of the home,
etc., reconcile conflicting information from different data sources,
and write up the report. Total time? About 6 to 8 hours, on average
where data is computerized and plentiful. Appraisers working in rural
areas or with less data availability will take longer to complete an
Appraisals of income producing property are much more timed
consuming as more research and analysis is required. The time can vary
from a few days on a small apartment building to many weeks for a
large, complex property.
Then, after thorough analysis of all general and specific data
gathered from the market, a final estimate or opinion of value is
Most important an appraisal isn't a substitute for a
professional home inspection. The appraiser formulates an opinion of
the property's value for the lender, while the inspector educates the
buyer about the condition of the home and its major components.
For a detail process of an Appraisal please look over this
feature article , by Calvin W. Moye that takes you step-by-step
through the appraisal process.
And now on to our next "step!"
Ron Kimball "A Internet Realtor"
Serving all of
Kitsap Mason & Pierce County, WA
1616 Ellis Court | Port Orchard, WA 98367
Line (360) 876-4741 | Fax (360) 876 4843