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What is an escrow? |
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Buyers and sellers of a piece of property establish terms and conditions for the transfer of the property. These terms and conditions are given to a third party know as the escrow holder. In turn, the escrow holder has the responsibility of seeing that the terms of the escrow are carried out. The escrow is an independent neutral account and the vehicle by which the mutual instructions of all parties to the transaction are compiled with. |
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How does the escrow process work? |
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The escrow is a depository for all monies, instructions and documents necessary for the purchase of your home, including your funds for down payment and your lender's funds and documents for the new loan. Generally, the buyer deposits a down payment with the escrow holder and the seller deposits the deed and any other necessary documents with the escrow holder. Prior to the close of escrow the buyer deposits the balance of the funds required and agreed upon by the parties with the escrow holder. The buyer instructs the escrow holder to deliver the monies to the seller when the escrow holder: |
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Forwards the deed to the title company for recording. |
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Is notified by the title company that a policy of title insurance can be issued that show title to the property is vested in the name of the buyer. | |
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The escrow holder thus acts for both parties and protects the interests of each within the authority of the escrow instructions. Escrow cannot be completed until the terms of and conditions of 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 the lender's requirement. |
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How do I open an escrow? |
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Your real estate will open the escrow for you. As soon as you execute your purchase agreement/joint escrow instructions, your agent will place your initial deposit into an escrow account with a closing company. Escrow amendments will be drawn to define all the conditions which must occur before the transaction can be finalized. Your purchase agreement/joint escrow instructions represent your written statement to the escrow holder. They will also require that title insurance be provided for the protection of your new home. |
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How will I know were my money has gone? |
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Written evidence of your deposit is generally included in your copy of the purchase agreement/joint escrow instructions. Your funds will then be deposited in a separate escrow or trust account and processed thought a local bank. |
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What information will I have to provide? |
| Confidential Statement of Identity - You will be asked to complete a Confidential Statement of identity as part of the necessary paperwork. This is used to identify the specific person in the transaction through their date of birth, social security number, etc. |
| Lender Information - Provide the escrow holder with your lender contact information as soon as possible. |
| Hazard/Fire information - Be sure to order your fire/hazard insurance once your loan is approved. Call your escrow holder with the agent's name and phone number so that they can make sure the policy complies with your lender's requirements. |
| Title to Home - Decide how you wish to hold title to your home. See the chart included in this booklet for guidance. The escrow holder will need t his information in order to prepare the grant deed. We suggest that you consult an attorney, tax consultant, or other qualified professional before you decide. |
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When do I sign the loan documents? |
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| Generally, your escrow instructions will be mailed to you for completion and signature. You will be contacted to set an appointment to sign the final loan papers. As this time, the escrow holder will also tell you the amount of money you will need (in addition to your loan funds) to purchase your new home. The lender will send your loan funds directly to the title company. |
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What do I need before my appointment to sign loan documents? |
| Cashier's check - Obtain a cashier's check make payable to your escrow company in the amount indicated to you by the escrow officer. |
| Lender's requirements - Make sure you are aware of your lender's requirements and that you have satisfied these requirements before you come to the escrow company to sign your papers. Your loan officer or real estate agent can help you. |
| When will I receive the deed? |
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| The original deed to your home will be mailed directly to you at your new home by the county recorder's office. It may take several weeks, depending on the county recorder's volume. |
| What's the next step after I've signed the closing documents? |
| The Escrow holder will return the documents to the lender for final review. This review usually occurs within a few days. After the review is completed, the lender is ready to fund your loan and informs the escrow holder. |
| How long is an escrow? |
| The length of an escrow is determined by the terms of the purchase agreement/joint escrow instructions and can range from a few days to several months. |
| What happens after I submit the loan application? |
| The lender will begin the qualification process, including verification of information submitted on the application and appraisal of the property. The lender will require that you obtain fire/hazard insurance if you are purchasing a detached home. A condo or townhouse may already have a master hazard policy, so check with your real estate agent. Also check with your insurance agent in regards to additional coverage for you personal property. The lender will also require that you obtain title insurance and may have other requirements that must be met before the close of escrow. |
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What happens after I submit the loan application? |
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The close of escrow is the culmination of the transaction, and signifies the legal transfer of title from the seller to the buyer. Approximately three days before the scheduled close of escrow, the loan documents are executed by the buyer. The new lender usually requires 24-72 hours to review the final executed documents. After the review period the new lender wires the loan funds to the title company. Escrow collects the remainder of the buyer's down payment and closing costs at the time of document execution so that they are in a position to close escrow within the new lenders time frame. When loan funds are wired, the file is then set up to "record". This is the legal transfer of title from the seller to the buyer the escrow holder will handle all the final accounting and insurance of official closing statements and remaining proceeds to all parties. |
