Escrow Question

Basically, using escrow means that both parties have completed all the requirements in the buyer's/seller's agreements, and all the legalities are completed, so that the funding from the lender can be moved to the seller. This keeps the buyer or seller from making promises and not keeping them. It also forces both parties to complete all the legalities (title, taxes, inspections) prior to moving monies.

Many lenders will refuse to lend to you without an escrow. Also, I suggest utilizing an escrow account for your property taxes.

This is for both yours and the seller's protection.

ETA: Using escrow doesn't mean that you have spending or budgeting issues. We're very careful with our spending and budgeting. It's just one less thing you have to deal with when you're making your house payment, and one less thing you have to worry about when taxes come due. We put 40% down on our house and still chose to utilize the escrow account.

There is sooooo much paper work and legalities that need to be covered, that is what the escrow company is for. We used one when we did a buy direct from a home owner, and they did all the work.

Title companies have a couple of functions. They make sure all documents are complete and executed properly. They coordinate funds into/out of escrow and they record the title documents, i.e., transferring the deed to your home. They also provide title insurance, which covenants that the chain of title to your property is clear and that there are no underlying issues with the property. This is important in order for you to sell it in the future or obtain financing. If you are financing your home through a mortgage lender or bank, the title company coordinates the funds from the lender to the seller. The title company doesn't typically process monthly payments. If the seller is carrying the papers and you are making monthly payments directly to the seller, you should go through a collection company (i.e, Valley Installment Collections or some other company that processes payments for a minimal fee). This is important for payment tracking so that you don't have potential issues down the road.
If you are unsure about whether to use a title company, you should contact one (First American, Ticor, etc.) and speak with someone in their residential department to get a fuller picture of their function and the benefits and/or drawbacks of using them. They can also recommend an attorney who can review your paperwork as well. Deals are almost always skewed in favor of one party or the other and even among friends you want to make sure that your interests and your family are protected in this major investment.
Good luck and congratulations on your new home.

I have never heard of anyone buying/selling a house without a title company. We sold our home to a woman who paid cash and we still had escrow for the reasons Christy Lee has stated below.

Going through the process without a realtor representing you is daunting enough. Don't deal with the finances on your own without some professional help!

by using an escrow account, they lend credibility to the transaction. A legal stamp of approval, cutting down on the work you have to do.

Your understanding of it is correct, & they do play an important role. Lawyer representation is also helpful & beneficial.

My layman's take on it is: it helps make it all legal & worry-free. :)

I think having one realtor represent seller and buyer is not in your best interest as the buyer. They tend to do whatever they can to get the sale for the seller. The realtor you are using may not be like this but it's good to have your own representation - be it another realtor or a lawyer. (I'm from NYC and in NYC you have to have a lawyer for real estate transactions.) You should also get an independent inspector for the home to make sure everything is in good working order. My girlfriend bought a house and used the seller's recommended inspector and wound up with some major problems that she didn't know existed. I used an independent inspector on a house I was going to buy and he told me to run away - the pool was sinking....amoung other things. He checked out the house I wound up buying and he said it was great. Escrow is also a good idea. It just keeps things legitimate and ensures everything is paid for correctly.

Hope this helps! Good luck!

You need to go through a title company to make sure all documents are processed correctly and legally.

As far as escrow, we do not participate in that aspect of it. We waived escrow by putting a heftier amount of $$ down because we prefer to save the money ourselves to pay the yearly taxes and insurance vs it being prorated and the mortgate company "using" our $ all year.

It's basically 2 bills we KNOW are due by the end of the year and we make sure we put back enough to cover those ourselves.

If someone needs more help with budgeting, spending issues, discipline, etc THEN it is not a bad idea to have the mortgage company use escrow because they basically are doing it for you to make sure you have the correct funds available when they are due.

Good luck with your new home!