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After sprucing up the old place, sorting through hordes of prospects to find the most ready, willing, and able buyer, and haggling over price and terms, you finally signed a contract for the sale of your house. Are your troubles over? Have you sold your house at last? Nope. You've only ratified (signed) an offer. You can't start packing your bags yet. You have a lot of work to do before the sale is a done deal. This chapter can help.
You may be delighted to know that escrow has nothing to do with snails. Escrow refers to the holding of important documents and money related to the sale of your house.
After the offer is ratified, you need someone you can trust to hold the stakes while you and the buyer take care of unresolved contract details, such as arranging property inspections and getting financing for the purchase. On the first business day after you and the buyer sign the contract, either you or the buyer (or your agent or the buyer's agent, if agents are involved) open an escrow. This process happens by delivering all the funds and documents related to your sale to a neutral third party - the escrow holder (also called an escrow officer).
In accordance with instructions from you and the buyer, the escrow officer keeps these funds and documents in an escrow file created especially for your transaction. Depending on real estate practices in your area, your escrow may be handled by a lawyer, a firm that specializes in doing escrows, or a title company. Sellers and buyers usually select an escrow holder based on their agents' recommendations.
Based on your house's sale price, escrow fees can run from a couple of hundred dollars to several thousand dollars. Brokerage customs where the property is located usually dictate whether you or the buyer pay for the escrow, or you split the fee 50/50 with the buyer. Regardless of custom or practice, responsibility for the payment of escrow fees is a negotiable item. In a strong seller's market, for example, buyers may offer to pay for the escrow to sweeten their offers, even though local custom decrees that buyers and sellers usually split escrow costs.
