Semsugar, Home Buyer in San Diego, CA

Please explain escrow and who pays for it the buyer or seller?

Asked by Semsugar, San Diego, CA Thu Aug 18, 2011

Help the community by answering this question:


You both pay for it.

Here's the idea, Semsugar. Back in the old days, Rancher Bob would ride for three days to meet Farmer Phil under a tree and exchange a bag of money for the deed to the lower forty. Along the way, Rancher Bob would meet some friendly enough people. When things went well, Rancher Bob could make it to the courthouse, also a three day ride, record his deed, and life went on fine.

Sometimes, Rancher Bob would show up at the courthouse to find that one of those people he'd passed along the way were headed to the courthouse with a deed, and Rancher Bob was out a bagful of money and five or six days behind Farmer Phil, who took the money and ran the other way!

So what Escrow does is: they take the money from the buyer, the deed from the seller, take the deed to the courthouse and verify that nobody else has gotten there first. They then record the deed, give the money to the seller, and all is good.

There's usually a title insurance company in there, and often a lender, but the mechanics are the same thing - it's to prevent the Seller from selling a deed to many people, and making it a race to see who gets to the courthouse first.

Escrow is also responsible for paying off liens, such as the seller's old mortgage, we ask them to pay the real estate agents, pay the title insurance company, pay the hazard insurance company, sometimes we ask them to pay the current utility bill, all the things that are necessary to deliver the property free and clear to the new buyer.

All the best,
0 votes Thank Flag Link Thu Aug 18, 2011
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