What is escrow?
Buyers and sellers establish the terms and conditions for the transaction and give this information to a third party escrow holder. The escrow holder ensures that the terms of the real estate transaction are followed through on. The escrow holder holds all the legal documents and funds for the buyer and seller and distributes them based on the instructions of the buyer and seller. The escrow holder will facilitate the purchase and has the following responsibilities:
Is an impartial stake-holder and distributor of documents and funds
Processes and coordinate the flow of documents and funds
Informs the buyer and seller of progress on the escrow
Responds to the lenders requirements
Secures a title insurance
Obtains approvals of reports and documents for both parties
Prorates and adjusts insurances, taxes, rent, etc.
Records the deed and loan documents
Maintains the security and accountability of funds
Why do I need an escrow?
For the buyer the escrow ensures that that funds are not transferred until all conditions of the deal have been met including inspections and repairs. The buyer is responsible for understanding all instructions in the escrow and to ask the officer to clarify any and all questions or direct them to your attorney.
What is required of all parties involved for escrow?
Deposit required funds to pay purchase price
Deposit funds for homeowners insurance and title insurance
Arrange for borrowed funds to be deposited to the escrow
Deposit deed of trust or mortgages to secure loan
Approve inspection reports, the preliminary report for the title insurance, and any other terms indicated in the purchase agreement
Fulfill conditions and terms they are held responsible for as stated in the escrow instructions
Deposits loan proceeds to the purchaser
Directs escrow holder on the conditions that allow for the use of loan funds
The Escrow Holder:
Orders the title insurance
Gets approvals from buyer for Preliminary Report, pest inspections, home inspections, and other inspections included in the deal
Receives funds from the buyer and lender
Prorates insurance, tax, rents, etcx
Disburses funds for title insurance, recording fees, comissions, lien clearance, etc
Prepares each party a final statement that includes the amounts that will be disbused for services and other other amounts neeeded to close escrow
Records the deed and loan documents, gives the deed to the buyer, gives the loan documents to the lender, and gives the funds to suller
Deposits the deed to the escrow holder to give to the buyer
Deposits proof of all inspections and repairs included in the agreement
Deposits other required documents including tax receipts, mortgage holder addresses, insurance policies, equipment warranties, or home warranties, as well as any other required documents indicated in the sale agreement
What does the escrow process entail?
The escrow receives and allocates all funds, instructions, and documents including the down payment and the lenders funds and documents. The buyer gives the escrow holder the down payment and the seller gives them the deed and other documents. Prior to closing of escrow, the buyer will give the remaining balance to the escrow holder and the escrow holder will distribute these funds to the seller after they:
Forward the deed to the title company
Receives notification from the title compnay that the title insurance can be issues to show the title is vested in the buyers name
The escrow holder is impartial so acts and protects both parties as stated in the escrow instructions. Escrow does not close until all terms and conditions have been met and both parties have signed escrow documents. The escrow holder follows the instructions stated in the purchase agreement and the lenders requirements.
How do I open an escrow?
The real estate agent opens the escrow and after the purchase agreement escrow instructions are compiled the agent will place the initial deposit into the escrow account. Escrow amendments define the conditions necessary to finalize the transaction.
How is the Escrow Processed?
1. Opening of escrow
2. Review and forwarding of the preliminary title report to the buyer and lender
3. Coordinate loan processing
4. Provide info for appraisal
5. Order pest or roof inspections if needed
6. Order property Inspections
7. Arrange access for inspectors
8. Review all reports and forward them to clients
9. Schedule repair work if needed
10. Review completion notices and forward them to client
11. Order and review loan documents
12. Review escrow instructions
13. Schedule and conduct the walkthrough inspection with buyer
14. Arrage for the escrow sign-off meeting
15. Coordinate close of escrow and possession
16. Arrange for the transferring of the keys to the property
How do I know where my money is going to?
Written evidence of the funds you deposit is included in the purchase agreement and then deposited into an escrow account that is processed through a bank.
What information do I need to Provide?
Confidential Statement of Identity: This identifies the personnel involved in the transaction through their date of birth and social security number.
Lender Information: Give the escrow holder your lender’s contact information in a timely manner.
Hazard & Fire Insurance: Once your loan is approved order the fire and hazard insurance and provide your escrow holder with the agent’s contact information. The escrow holder will ensure that the policy is in compliance with the requirements stated by your lender.
Property Title: Tell your escrow holder how you want to hold the title to your home and they will use this information to prepare the grant deed.
Signing Loan Documents: Escrow instructions are mailed to you for you to complete and sign. You will set an appointment where you sign the final loan papers and the escrow holder will inform you of the amount remaining you need to purchase the home. The lender sends the funds they provide as your loan directly to the title company.
What about division of charges?
Unless specified by the buyer and seller, local custom will determine how the charges are divided. Fees and services that may be divided include:
Title Insurance Policy Premium
Costs related to obtaining the loan
What should I bring when I sign the loan documents?
Cashier’s Check: The cashier check should be the amount indicated by the escrow officer and made payable to the escrow company.
Lender’s Requirements: Be sure you have met all of the requirements indicated by your lender before you sign the final papers.
When will I get the deed to the home?
The deed will be mailed from the county recorders office to your new home and may take up to several weeks.
What do I do after signing closing documents?
After you sign, the escrow holder will give them to the lender to review. This typically occurs in a few days ad after approved, the lender will fund the loan.
How long is escrow?
The length depends on the terms stated in the purchase agreement and varies from a few days to several months.
What happens after I submit my loan application?
The lender, as part of the verification process, will verify the information on the application and the appraisal They will require you obtain fire and hazard insurance if the property is an attached home but if it is a condo or townhouse a policy may already be included. Your real estate agent will tell you whether or not you need to take out a policy. Contact your insurance agent to see if there is any additional coverage. The lender may require title insurance or other requirements before the escrow is closed.
What happens during the closing of escrow?
Closing escrow completes the transaction and is the legal transfer of the title to the buyer. Three days prior to closing the loan documents are executed by the buyer and the new lender will review them within 24-72 hours. If the review is approved, the lender will transfer the loan funds to the title company and the escrow holder will collect the down payment and all other closing costs from the buyer. After the funds from the lender is received the file is set up to record. ”Record” is the legal transfer of the title. The escrow holder will complete the accounting and insurance for the closing statement and disburses funds to all parties involved.