What is Escrow?

Escrow refers to a third-party service that is part of every home purchase. When a buyer and seller initially arrive at a purchase agreement, they select a neutral third party to act as the escrow agent. The escrow agent collects a deposit from the buyer that is equal to a small percentage of the sale price. This deposit is known as “earnest money”. In exchange, the seller takes the property listing off the market. Until the final exchange is completed, both the seller’s property and the buyer’s deposit are said to be in escrow.

 

Are Closing Costs the Same as Escrow Fees?

No, escrow fees are a specific part of closing costs and vary depending on which company you use. Escrow fees can also vary significantly based on the property’s purchase price.

 

How Much Are Escrow Fees?

The escrow fees associated with closing on a house are extensive and can be difficult to parse through if you have never purchased a home before now.

When it comes to the escrow fees that you will need to pay, they are different for each escrow company. The fees will be for a certain dollar amount per every thousand dollars of the purchase price. Along with these fees, you will also need to pay a base fee of a few hundred dollars, depending on the escrow company you use. However much you are required to put into an escrow account, the seller will need to put in the same amount.

After all documents have been signed, the cash that was placed by the buyer in their escrow account will go to the seller and come off of the price of the home. In general, the escrow fee that you will need to pay is just one of many closing costs and fees that you will need to pay at closing. These costs include everything from homeowner’s insurance and transfer faxes to a courier fee and origination fee. Paying the escrow fees means that you are in the last phase of buying or selling a home.

 

Understanding Escrow Costs

Buyers and sellers have the right to find a suitable escrow agent. Depending on the state, the escrow agent may be a specific agency set up for these transactions or may be an attorney. Since the fees for escrow can vary between one and two percent of the purchase price of the home, it is important for you to determine the fees before settling on an agent. In addition to the basic escrow fee, you may also pay fees for:

• Transferring funds
• Copying or transmitting documents
• Office expenses

 

Who Pays Escrow Fees

In most real estate transactions, you would be asked to split the cost of escrow with the buyer of your home – but this is not always the case. Depending on what is negotiated during the offer phase, the buyer may ask you to pick up the full cost of escrow or the buyer may pick up full cost. The details will be outlined in your purchase agreement, so make sure you have a good understanding of your financial obligations before you accept it and move into escrow.

Although it can depend on where you live in California, the escrow fees are typically split 50/50 between both the buyer and seller. In general, the fees amount to 1-2 percent of the price of the home. So, whether you are the buyer or the seller of a home, be sure to have a good look at your purchase agreement before signing it to ensure you understand your financial obligations during the transaction. Escrow is a very serious and binding legal process, so be you want to get it right!

 

Other Common Third-Party Fees

Lender Title Insurance

Lender’s title insurance protects your lender against problems with the title to your property-such as someone with a legal claim against the home. Lender’s title insurance only protects the lender against problems with the title. To protect yourself, you may want to purchase owner’s title insurance.

Appraisal Fee

This covers the cost of having a professional appraiser evaluate a home and estimate its current market value. The cost of appraisals varies significantly depending on how much work is required.

Assignment Recording Fee

Government fee paid to your local recording office. It covers the creation of an official record of the deed transfer from the seller to the buyer. Although estimates can vary, the recording fee should be the same for all properties that fall within the same jurisdiction.

Closing Protection Letter

A fee charged by escrow agencies to create a closing protection letter (CPL) – a document that puts liability on the title company if the escrow does not disburse the home purchase funds appropriately.

Tax Service Fee

A tax service company takes this fee to verify that there are no outstanding tax liens against the purchased home. Mortgage lenders require the tax service fee in case a defaulting borrower doesn’t pay their property taxes. Those taxes are deducted from the foreclosure sale and decrease the amount the lender can recover.

Credit Report Fee

Your lender will order a credit report to determine your creditworthiness. A fee, typically $20-$25, is paid to the credit service agency to obtain the report.

Flood Certification

A fee, typically less than $15, charged to obtain the government-required document used to determine whether the subject property is located in a flood plain. If a flood certification determines that your property is located in a “flood zone,” an area in high risk of flood damage, then you’ll have to pay for that certification, and your lender will require you to purchase flood insurance.

 

What Happens at Citrus Heritage Escrow?

During the escrow period, our title department begins researching and examining all historical records pertaining to the subject property. Barring any unusual circumstances, a commitment for title insurance is issued, indicating a clear title or listing any items which must be cleared prior to closing. The commitment is sent to you for review.

Your escrow officer follows instructions on your contract, coordinates deadlines, and gathers all necessary paperwork. For example, written requests for payoff information (called “demands”) are sent to the Seller’s mortgage company and any other lien holders.

When choosing an escrow company there can be many important factors to evaluate. Fees, location, staff and even recommendations from friends and colleagues are all things to consider. With Citrus Heritage Escrow by your side, you can rest assured that when you receive your settlement check, you’ve gained the maximum benefit from your home sale or purchase.

Call us today with any questions or concerns. Our professional Escrow Agents will help you through this exciting yet confusing process. (951) 335-7200