What is escrow?
When the decision is made to purchase a property, terms and conditions are established for the ownership transfer of that property. These terms and conditions are given to a third party known as the escrow holder. The escrow holder acts for both parties and protects the interests of each within the authority of the escrow instructions.
How does the escrow process work?
The escrow is a depository for all monies, instructions, and documents necessary for the sale of your home. This includes the Buyer providing funds for a down payment with the escrow holder, and the Seller depositing the Deed and any other necessary papers with the escrow holder. Prior to the close of escrow the Buyer deposits the funds required and agreed upon by the parties to the sale with the escrow holder.
The escrow holder forwards the deed to the title company for recording and delivers the monies to the seller. The title company notifies the escrow holder that a policy of title insurance can be issued showing that title to the property is vested in the name of the buyers.
The escrow holder handles the pro-rations and adjustments on any fire/hazard insurance, real estate taxes, rents, interest, etc., based on the escrow instructions of both parties.
The buyer instructs the Escrow Holder to deliver the money to the Seller when the escrow holder:
1. Records the deed and,
2. delivers to the Buyer a policy of title insurance which shows title to the property vested in the name of the Buyer.
The escrow holder is authorized to deliver the deed to the Buyer when the Buyer has deposited the agreed upon purchase price and fulfilled any other condition specified in the escrow instructions.
The escrow holder thus acts for both parties, and protects the interests of each within the authority of escrow instructions. Escrow cannot be completed until the instructions have been satisfied and all parties have signed escrow documents. The Escrow Holder takes instructions based on the terms of the Purchase Agreement and Lender’s requirements.
How do I open as escrow?
Your real estate agent will open the escrow for you. As soon as you execute the Purchase Agreement, the Buyer’s Agent will place the Buyer’s initial deposit, if any, into the escrow account. The escrow Instructions will be mailed to you shortly after the escrow is opened.
What information will I have to provide?
You may be asked to complete a Confidential Statement of Identity (SI) as part of the necessary paperwork. Due to the fact that many people have the same names; 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 kept confidential.
What do I need to do for my appointment to sign the deed?
All parties signing the documents must bring proper identification. Please bring your valid driver’s license, state identification card, or current passport with you to the escrow company. This item is needed to verify your identity by a notary public. This is a routine, but a necessary step for your protection.
When do I sign escrow instruction and where do I do this?
Generally, your escrow instructions are mailed to you.
How long is an escrow?
The length of an escrow is determined by the terms of the Purchase Agreement and can range from a few days to several months. An escrow often averages 30 to 60 days.
What is “Close of Escrow” (COE)?
An escrow closing is the culmination of the transaction. It signifies the legal transfer of title from the Seller to the Buyer. Generally, both the Grant Deed and the Deed of Trust are recorded within one working day of the escrow holder’s receipt of loan funds. This completes the transaction and signifies the ‘close of escrow.” Once all conditions of the escrow have been satisfied, the escrow officer informs you or your agent of the date escrow will close, and takes care of the technical and financial details.
Do I continue to pay my monthly mortgage payment?
Yes, Your mortgage payment(s) must be kept current throughout the course of the escrow transaction. If the payments are not kept current; the Lender(s) can/will assess and collect late charge(s).
When do I get my final proceeds check?
The proceeds check is disbursed upon close of escrow. This is when the escrow officer is able to verify with the Country Recorders Office that the documents have recorded and legal transfer has occurred. The proceeds check can then be delivered to your real estate agent, picked up at the escrow office, or you can provide escrow with wiring instructions so that funds are deposited directly into the account(s) you specify.
Who Pays for What?
The Seller can generally be expected to pay for:
- Real estate commission
- Owners title insurance policy
- One half of the sub-escrow fee
- One half of the escrow fee
- Document preparation for deed
- Notary fees
- Recording charges to clear all documents of record against the seller
- Documentary transfer tax
- City or country transfer or conveyance tax (according to contract)
- Loan fees required by buyer’s lender (FHA/VA)
- Payoff all loans in seller’s name
- Interest accrued to lender being paid off, statement fees re conveyance fees, and prepayment penalties
- Termite inspection (according to contract)
- Termite work (according to contract)
- Any judgments, tax liens, etc., against the seller
- Home warranty (according to contract)
- Tax prorating (for any taxes unpaid at the closing)
- Any Homeowners Association dues pro-rations.
- Any bonds or assessments (according to contract)
- Any and all delinquent taxes
- Wire transfer fees
- Messenger fees
The buyer can generally be expected to pay for:
- Lender title insurance policy
- One half of the sub –escrow fee
- One half of the escrow fee
- Document preparation fee for deed
- Notary fees
- Recording changes for all documents in buyer’s name
- Tax pro-ration (for any taxes unpaid at the closing)
- City or county transfer or conveyance tax (according to contract)
- Homeowner’s association transfer fee
- All new loan charges (except FHA/VA loans)
- Interest on new loan from date of funding to 30 days prior to first payment date
- Assumption or change of records fee on existing loan
- Beneficiary statement for assumption of existing loan
- Inspection fees (roofing, property, geological, etc.)
- Fire insurance premium for first year wire transfer fees
- Messenger fees
YOURS OR THEIRS
THE PERSONAL VS. REAL PROPERTY DILEMMA
The distinction between property and real property can be the source of difficulties in real estate transaction, The purchase contract is normally written to include all real property; that is, all aspects of the property that are fastened down are an integral part of the structure. For example, this would include potted plants, freestanding refrigerators, washers and dryers, microwaves, book cases, swag lamps, etc. If there is any uncertainty whether an item is included in the sale or not, it is best to be sure that the particular item is mentioned in the purchase contract as being included or excluded.