"Trustco " Your Trust & Escrow Service
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- What is Escrow?
- Why Do I Need an Escrow?
- Who Chooses the Escrow?
- How Does Escrow Work?
- What Do I Have to Do While in Escrow?
- What is a Closing Statement?
- What Fees and Costs Will Be Charged?
- What about Cancellations?
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. In a market filled with uncertainties, escrow agreements are an easy, acceptable and versatile tool for assuring the safe, fair and efficient completion of a variety of transactions. An escrow agent will hold assets, invest funds and oversee distribution of funds so conditions of an escrow agreement can be met. The escrow agent accomplishes this by:
Whether you are the buyer, seller, lender, or borrower, you want the assurance that no funds or property will change hands until ALL of the instructions in the transaction have been followed. The escrow holder has the obligation to safeguard the funds and/or documents while they are under his control and to disburse funds and/or convey title only when all provisions of the escrow have been complied with.
Be sure to choose an independent licensed escrow provider who is 100% neutral, licensed by SUGEF (Superintendencia General Entidades Financieras), requiring adherence to the most stringent standards in the industry and whose sole business is providing escrow services.
The principals to the escrow – buyer, seller, lender, borrower – will establish escrow instructions, most usually in writing, to be created, signed and delivered to the escrow officer. If a broker is involved, he will normally provide the escrow officer with the necessary information for preparing your escrow documents.
The escrow officer will process the file, in accordance with the escrow instructions, and when all conditions required in the escrow agreement have been met, the escrow will be "closed."
The duties of an escrow holder include: following the instructions given by the principals and parties to the transaction in a timely manner; handling the funds and/or documents in accordance with the instructions; paying all bills as authorized; responding to authorized requests from the principals; closing the escrow only when all terms and conditions have been met and basically distributing the funds in accordance with instructions provided. For these purpose a closing statement is prepared and also an statement of account is presented to the client for his personal information.
The selection of the escrow holder is normally done by agreement between the principals. If a real estate broker is involved in the transaction, the broker may recommend an escrow holder. However, it is the right of the principals to use an escrow holder who is competent and who is well experienced in handling this type of matters.
The key to a transaction as important as your sale, or purchase of your home, is to READ and understand your escrow instructions. If you do not understand them, you should ask your escrow officer to explain the instructions.
Escrow procedures may differ from one case to another. Go over the instructions and proceedings with your escrow officer in order to avoid last minute delays or misunderstandings.
When the escrow officer closes the escrow, you may want a copy of the closing statement. Be sure to request a copy o this document to your escrow agent.
A closing statement is an accounting, in writing, prepared by the escrow agent which sets forth the charges and credits to your account. The items shown on the statement will reflect the purchase price, the funds deposited or credited to your account, payoffs on existing encumbrances and/or liens, the costs for all services and determination of the funds you are entitled to at closing. When you receive your closing papers, review the closing statement; it should come itemized and reflecting the financial aspects of YOUR transaction. If anything does not make sense to you. Feel free to ask your escrow officer for an explanation.
When going through your closing papers, examine all of them.
Escrow fees are usually calculated based on a percentage from the amount to be placed in escrow.
Your escrow officer, upon request, can present you an estimate of the escrow fees and costs as well as fees charged by other parties involved, provided such information is available.
No escrow is opened with the intention that it will be cancelled, but there are occasions when a contingency cannot be met, or when the parties disagree during the period that escrow is open. Ordinarily and escrow holder will take the position that no funds on deposit can be refunded until the escrow holder is in receipt of mutual cancellation instructions signed by the principals. The escrow holder cannot normally make a determination as to who is the "rightful" party in a dispute on a cancellation until the principals agree. The escrow holder is not a judge nor an arbitrator.
In case the parties do not reach a mutual agreement on the cancellation of the deal and the disbursement of funds, then the escrow agent will hold on to the funds until a competent authority (i.e. judge or arbitrator) indicates how the funds should or must be released.
Nevertheless, the above is only how usually these matters are handled but each case is different and it will depend on the terms and conditions negotiated by the parties.