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With 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) is 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 and disburses payments (which may include, principal and interest, taxes, insurance, and underlying mortgage payments). The escrow company's disbursements of the payments to third parties (the underlying mortgage company, the county assessor (for property taxes) and/or the insurance company) are especially important to insure payments made by the buyer are being properly applied to the parties' respective obligations under the seller financing instrument.  The escrow company may also monitor the account and notify the seller if the buyer fails to make the required payment(s).

It is important for buyers and sellers to research the escrow company they intend to use to confirm, among other things, that the company has adequate insurance coverage in the event of losses from events such as cyber theft, employee impropriety and negligence.  Currently, New Mexico only REQUIRES escrow companies to carry $200,000 in total coverage.  Traditionally, this amount has been wholly inadequate to cover losses in the event of the foregoing, which is why additional coverage is so important.  

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