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The
Escrow Process in the South Bay
Reprinted
from California Land Title Association Escrow Process
Buying
or selling a home (or other piece of real property) usually
involves the transfer of large sums of
money. It is imperative that the transfer of these funds and
related documents from one party to another be handled in
a neutral, secure and knowledgable manner. For the protection
of buyer, seller and lender, the escrow process was developed.
As a buyer
or seller, you want to be certain all conditions of sale have
been met before property and money change hands. The technical
definition of an escrow is a transaction where one party engaged
in the sale, transfer or lease of real or personal property
with another person delivers a written instrument, money or
other items of value to a neutral third person, called an
escrow agent or escrow holder.
This third person holds the money or items for disbursement
upon the happening of a specified event or the performance
of a specified condition.
Simply
stated, the escrow holder impartially carries out the written
instructions given by the principals. This includes receiving
funds and documents necessary to comply with those instructions,
completing or obtaining required forms and handling final
delivery of all items to the property parties upon the successful
completion of the escrow. The escrow must be provided with
the necessary information
to close the transaction. This may include loan documents,
tax statements, fire and other insurance policies, title insurance
policies, terms of sale and any seller-assisted financing,
and requests for payment for various services to be paid out
of escrow funds.
If the
transaction is dependent on arranging new financing, it is
the buyer’s or the buyer’s agent’s responsibility
to make the necessary arrangements. Documentation of the new
loan agreement must be in the hands of the escrow holder before
the transfer of property can take place. A real estate
agent can help identify appropriate lending institutions.
When all
the instructions in the escrow have been carried out, the
closing can take place. At this time, all outstanding funds
are collected and fees - such as title insurance premiums,
real estate commissions, termite inspection charges -are paid.
Title to the property is then transferred under the
terms of the escrow instructions and appropriate title insurance
is issued.
Payment
of funds at the close of escrow should be in the form acceptable
to the escrow, since out-of-town and personal checks can cause
days of delay in processing the transaction.
The following
items represent a typical list of what an escrow holder does
and does not do.
The Escrow Holder:
• Serves as the neutral “stakeholder” and the
communications link to all parties in the transaction;
• Prepares escrow instructions;
• Requests a preliminary title search to determine the
present condition of title to the property;
• Requests a beneficiary’s statement if debt or
obligation is to be taken over by the buyer;
• Complies with lender’s requirements, specified
in the escrow agreement;
• Receives purchase funds from the buyer;
• Prepares or secures the deed or other documents related
to escrow;
• Prorates taxes, interest, insurance and rents according
to instructions;
• Secures releases of all contingencies or other conditionsas
imposed on any particular escrow;
• Records deeds and any other documents as instructed;
• Requests issuance of the title insurance policy;
• Closes escrow when all the instructions of buyer and
seller have been carried out;
• Disburses funds as authorized by instructions, including
charges for title insurance recording fees, real
estate commissions and loan payoffs;
• Prepares final statements for the parties accounting
for the disposition of all funds deposited in escrow
(these are useful in the preparation of tax returns.)
The Escrow
Holder Does Not:
• Offer legal advice;
• Negotiate the transaction;
• Offer investment advice.
Your local
title company will be happy to provide additional information.
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