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Escrow companies serve as a neutral third-party that collects and disburses payments, monitors accounts and holds important documents for buyers and sellers, landlord and tenants and creditors and debtors. 


In the case of an REC, a General Warranty Deed conveying legal title to the buyer (in the event the buyer satisfies the terms of the REC) and a Special Warranty Deed conveying the property back to the seller (in the event of buyer’s default) are deposited with the escrow agent to be held until either the buyer satisfies all conditions of the REC or the buyer defaults. This is important because the buyer or seller may not be available when one of these events should occur, and the party entitled to clear title to the property will need the respective deed to clear the title to the property.   


Whether an REC or other seller financing instrument, the escrow agent accepts payments from the buyer and in some cases, the seller  (which may include, principal and interest, taxes, insurance, and HOA or Condo Association dues). The escrow company then disburses these payments to third parties as provided by the contract (such as other mortgage companies for underlying loans on the property, the county assessor for property taxes, the insurance company for improvement and liability insurance premiums, etc.). The remainder of the funds are generally disbursed to the seller, unless otherwise directed by the seller.


In short, the escrow company ensures payments made by the buyer, tenant or creditor are being properly applied to the parties' respective obligations under the contract between the parties. Some escrow companies. including New Mexico Escrow Solutions, will also monitor the account and notify the seller, landlord or creditor if the buyer, tenant or debtor fails to make the required payment(s).

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