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Escrow FAQ
The secure process of transfering ownership
Q: Why use the services of an Escrow
Company?
A: Escrow companies provide an experienced professional service regulated by law to protect
the interest of both the buyer and the seller. An escrow is the process of
closing a real estate sale in which a licensed third party prepares the
documents and handles the closing between buyer and seller. For the
protection of buyer and seller, all funds are required to be held in
a special secure trust account until closing, at which time the escrow
officer disburses funds according to identical escrow instructions
signed by buyer and seller. The third party handling the sale must
be licensed to do so, such as a licensed real estate broker or escrow
company. In the western United States, the majority of closings are
handled by real estate brokers, escrow or title companies. In the
eastern United States it is more common for attorneys to also be
involved than it is in the western United States.
Q: Does an Escrow
Company have the same legal authority to close a transaction as an attorney?
A: Yes. An Escrow Company is regulated by the same real estate laws
that an attorney must follow as regarding real estate closings.
Q: Are there very many Escrow companies specializing in
timeshare resales?
A: No. Timeshare resales is still a relatively new phenomenon.
In order to provide the high level of service we demand for our clients,
we insist that experienced and well-known title companies and escrow companies
are used to smoothly co-ordinate the escrow processing between the buyer and
seller and with all agencies involved in the transfer. Such agencies include
the resort management company, tax assessor's office, co-brokers, lenders, etc.
Q: Transferring ownership of a timeshare seems simple. Is it?
A: No. Although the dollar amount of the sale is relatively small,
and the escrow fee is small compared to an escrow for a house,
the details involved in processing and closing a timeshare resale
involve as much or more work than an escrow for a house.
We insist on a full and professional escrow, which sees to
every one of the items below:
- Determining what the resort requires in order to transfer ownership, such as documents, fees, and information.
- Preparing or seeing to the preparation of all legal documents.
- Verifying every detail of the seller's ownership, with the resort management.
Since sellers are often mistaken about what they own, escrow carefully verifies such details in writing with the resort to eliminate any possibility of confusion.
- Provides a real estate trust account to hold all funds until sale is closed.
- Responsibility to verify that the buyer's week is indeed available for buyer to use, i.e., that it is not banked with an exchange company or rented, or already used. This requires time consuming communication with the exchange company, seller, lender, and others.
- Getting the seller and buyer to return documents in a timely manner, properly completed and notarized.
- Getting loans and liens removed.
- Maintaining and reconciling detailed trust account records for each transaction.
- At closing, prepare and disburse checks to sellers, resorts, brokers, taxing authorities, lenders, and more.
- At closing, deliver to resort the documents, buyer information and transfer fees.
Q: What is the difference between closing costs
and escrow fees?
A: Closing costs refer to all costs of closing a sale,
including the escrow fee. The escrow fee is just one item of the
closing costs. Closing costs are the fees and charges that must
be paid, regardless of whether or not an escrow is
used - such items as document preparation fees, recording fees,
resort transfer fees, verification fees charged by resorts and
lenders, taxes, maintenance fee late charges, special assessments,
loan pay-off fees, postage or delivery charges.
COMMON SENSE ADVISE ABOUT ESCROW
As a practical matter, most people are simply not
equipped to prepare the documents and handle
the many details of an escrow. By using a licensed
escrow, the need for a buyer and seller to rely on
the honesty of each other, is eliminated. The fees
paid to an escrow are really like an insurance policy. The escrow
assures that the transaction is closed legally and
exactly in accordance with the purchase agreement between the
buyer and the seller. The escrow also confirms and
verifies all of the important facts of the transaction
as a protection for both the buyer and the seller.
The escrow assures that the buyer's funds are not disbursed unless:
- Title has been conveyed to the buyer free and clear of all liens;
- The homeowners association and resort verify that there are no unpaid assessments or
liens against the timeshare
- The deed from the seller has been signed and notarized by all persons claiming an interest in the property
- The real estate taxes have been paid, old mortgages have been released, etc.
- The seller is protected because deed to the buyer is not recorded unless the full purchase funds are
in hand and verified by escrow as being good funds.
- Innumerable other items must be verified and processed - each escrow is different
In summary, by using professional escrow the buyer is
assured of receiving exactly what the purchase agreement
calls for, and the seller is assured that all of the requirements have been satisfied,
thereby eliminating any future litigation derived from conflicts with the buyer.
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