What exactly is an escrow?
An escrow is an independent "stakeholder" account and is the vehicle by which the interests of all parties to the transaction are protected.
The escrow is created shortly after you execute the contract for the sale of your home and becomes the depository for all monies, instructions and documents pertaining to the sale. Some aspects of the sale are not part of the escrow. For example, the buyer and the seller must decide which fixtures or personal property items are included in the sales agreement. Similarly, loan negotiations occur between the buyer and the lender. Your real estate agent can guide you in these non-escrow matters. Escrow services in Northern California are generally provided by title companies.
What does an escrow holder do?
The escrow holder is a neutral third party, taking instructions based on the terms of the purchase agreement and the lender's requirements. He or she is responsible for maintaining the escrow account and managing the escrow process to ensure that the conditions of the sale are properly met.
Duties of the escrow holder include...
Opening Escrow
How does the escrow process work?
The escrow retains the buyer's funds for the down payment, the new lender's funds, documents for the new loan, the loan payoff or assumption requirements from the existing lender, and the Grant Deed. The escrow officer takes instructions from you and the buyer, the real estate agent and the lender, based on the terms of your Sales Agreement and the lender's requirements. He or she can hold inspection reports and bills for work performed as required by your Sales Agreement. Other elements of the escrow include obtaining the buyer's hazard insurance, issuance of title insurance and preparation of the Grant Deed from you to your buyer. Escrow cannot be completed until the instructions (requirements) have been satisfied and all parties have signed escrow documents.
How is the escrow opened?
Either your real estate agent or the buyer's agent may open the escrow. As soon as you execute the Sales Agreement, the buyer's agent will place the initial deposit into an escrow account at the title company or into the estate broker’s trust account.
How will I know where the buyer's money has gone?
Written evidence of the deposit is generally included in your copy of the sales contract. The funds will then be deposited in a separate escrow or trust account,
What information will I have to provide?
You may be asked to complete a Statement of Identity as part of the necessary paperwork. Because many people have the same name, the Statement of Identity is used to identify the specific person in the transaction through such information as date of birth, social security number, etc. This information is considered confidential. Depending on the method by which you currently hold title to the property, you may also be asked to provide copies of Trust Agreements, Partnership Agreements or corporate documents.
How long does it take to complete the escrow?
The amount of time necessary to complete the escrow is determined by the terms of the purchase agreement. It is normally 30 to 60 days but can range from a few days to several months.
What happens next?
Unless he/she is paying cash, the next step will be that the buyer will apply for a mortgage loan. Your real estate agent will be able to keep you informed about the progress of the loan application. During the escrow process, you are still required to make your payments on existing loans so that you do not incur any late fees or damage to your credit rating.
Paying Off Your Existing Loans
Unless the buyer takes over your existing loan(s) on the property, the loan(s) will be paid off during the escrow process. You will need to furnish complete information to your escrow officer and real estate agent on each loan against your property. Please be prepared to provide the name of the lender, the loan number, address and phone number of the lender. Your escrow officer will need this information to order the loan payoff demands so the loan(s) may be paid off correctly during the escrow. Homeowners' Association information may also be required if you are selling a condominium, townhome or property located in a planned unit development (P.U.D.). All of this information will help to ensure the timely closing of the escrow.
Disclosures and Contingencies
During the process of selling your property, you will be asked to fill out a property disclosure form (known as a Transfer Disclosure Statement), which is now required by law. In this document, you will inform the buyer of any significant facts you have about the condition of the property. If you are moving out of California, other disclosures may be necessary. Your real estate agent or escrow officer will assist you with these.
There will, no doubt, be various contingency dates in your real estate sales contract. You should be very aware of these and be sure that the actions required are performed in a timely manner. Such contingencies include the buyer's loan approval, approval of the Preliminary Title Report, approval of structural pest control and other inspections. Stay closely in touch with your real estate agent regarding these important dates.
After the buyer's loan is approved, what's next?
When the loan is approved and the loan documents are sent to the escrow officer or the escrow assistant handling your transaction, "escrow instructions" and the Grant Deed will be prepare |