August 13th, 2018 6:58 AM by Jackie A. Graves, President
In escrow is a temporary condition of an item such as money
or a piece of property that has been transferred to a third party with the
intentions of delivery to a grantee as part of a binding agreement. Valuables
in escrow are generally delivered by an escrow agent to a grantee upon satisfaction of outlined
Escrowed items are most commonly found in real estate
transactions. Property, cash and the title to the property are often held in
escrow until all specified conditions are met and transfer of ownership can
occur. Lawyers will most commonly act as escrow agents in such situations.
While property is held in escrow, the buyer cannot take possession
of or occupy the space. Real estate deals must clear a series of stages during
the escrow process. An appraisal of the property must be conducted if it has
not already been done. There may be issues with the transaction if the
appraised value of the property is lower than the agreed upon purchase price.
Lenders will not disburse financing that is above an appraised
value regardless of what deal price the parties committed to. The buyer could
try to find funding to cover the missing portion of the agreed purchase price
for the property. If they cannot make up the difference while the real estate
is in escrow, the transaction might be terminated.
Other issues can arise while a property is in escrow. The buyer
could have difficulty securing necessary insurance and other policies needed to
complete the transaction. Even if a title search was performed, there may be
liens and other claims attached to the property that surface. The buyer may
have wanted the property for a use that does not match current zoning
regulations. The seller might seek a variance while the property is
in escrow to allow the buyer to proceed with their intended plans upon taking
full ownership of the real estate.
The purchase might have included guarantees that the seller would
address needed repairs to the property. This could include the removal of
landscape features such as trees or the reconstruction of part of a building.
If the seller does not make good on those promises while the property is in
escrow, then the deal might be ended.
The intent of keeping property in escrow is to give assurance to
all parties that the mutual responsibilities outlined in the agreed upon
contract will be fulfilled.
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