Escrow: place in custody or trust
When you buy or sell a home, your real estate agents are going to direct and set up an escrow account for you. The buyers and sellers are supposed to negotiate who they want to handle this business, with the idea that a buyer or seller might shop around for the best rates and/or service.
Most of the time, it’s the agents that are making recommendations to their respective clients for this service. If it’s a buyer’s market, the buyer’s agent will likely dictate who escrow is. If it’s a seller’s market, the listing agent will likely dictate the company that provides this service.
Shopping around for escrow service might save you some money and nobody should ever discourage you from doing this.
What is the purpose of Escrow
The escrow company will handle the transfer of funds as well as prepare the necessary paperwork to transfer legal ownership of real property. They will also arrange the signing of closing documents.
Your mortgage company may have another type of “Escrow”
Often when buying or selling real estate, you’ll find that there are similar or identical terms that can cause confusion. Your mortgage lender may discuss “escrow” with you for the purposes of including property taxes and hazard insurance as part of your monthly payment. When real estate agents refer to “escrow” we are referring to the company that will be handling the funds and legal paperwork to transfer or convey title.
The escrow company will likely hold your earnest money while we move from mutual agreement to the official closing.
How much does escrow cost?
Be aware that escrow fees are not regulated by the government (although Title companies who provide escrow services must file there rates schedule with the Office of the Insurance Commissioner). Some agencies may charge a low fee but charge for other incidental costs like wire transfer fees, courier fees, copying fees and a host of others. You’ll also pay sales tax for escrow service.
The fee is based on how much the sales price of the property is and is most commonly split in two, with the home seller paying half and the new buyer paying another half. Some types of loans require that the seller pay the entire amount so it’s important to know that when reviewing or presenting offers.
The fee is not a percentage, but a range. So if your home is selling between $500,000 and $600,000 for example, than the fee is X. Fidelity National Title has a rate calculator here. https://rates.fntg.com/?brand=fidelity You can ask your real estate agent or the escrow company directly to provide a rate sheet or a rate quote.
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