What is an Escrow?
An escrow is a neutral, independent "stakeholder" account
and is the vehicle by which the interests of all parties to the
transaction are protected.
The escrow is a depository for all monies, instructions
and documents necessary for the sale/purchase or refinances of
real property, including the funds for the down payment and closing
costs, the deed from the seller, and lender's funds and documents
for the new loan. The escrow officer takes instructions based on
the terms of the purchase agreement between the buyer and seller
and the lender's requirements.
The escrow holder will:
- take instructions based on the terms of the
purchase agreement between buyer and seller
- take instructions based on lender requirements
- order the title search and title insurance
- hold the funds deposited by the buyer and
lender
- hold the grant deed deposited by the seller
- hold inspection reports and bills
- order payoff statements to clear any liens
and/or encumbrances that affect the title to the property
- order the recording of the documents
- disburse all funds at closing
- furnish all parties with a final settlement
statement at closing
Escrow cannot be completed until all parties
have signed the escrow documents and all the conditions in escrow
have been satisfied.
How is escrow opened?
As soon as the buyer and seller execute the purchase agreement, the real estate
agent(s) will open the escrow. At that time, the buyer's deposit into the
escrow trust account at First American Title or into the real estate broker's
trust account.
What information does the buyer and seller
have to provide?
The buyer must inform the Escrow Officer and new lender of the manner in which
the buyer will hold title to their new home so that all documents can be prepared
correctly. The manner in which the buyer holds title can have tax and legal
consequences. We suggest you consult your attorney or tax adviser to assist
you in your decision.
In addition, all parties in the escrow will be
asked to complete a statement of information as part of the necessary
paperwork. Because many people have the same or similar names,
the statement of information 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 strictly confidential.
How long does it take to complete the
escrow?
The length of an escrow is determined by the terms of the
purchase agreement between the buyer and seller. It is normally 30
to 45 days, but can range from a few days to several months.
How does the loan process work?
The real estate agent can provide current financing information
to help the buyer in selecting a lender. The lender might be a bank,
savings and loan, or a mortgage company. The borrower will be required
to complete a loan application, which will require personal and financial
information.
What happens after the borrower submits
the loan application?
The lender will begin the qualification process including
verification of information submitted on the application, a credit
report, and an appraisal of the value of the property.
The lender will require that the borrower obtain
hazard/fire insurance and flood insurance, if the property is in
a specific type of flood hazard zone. It is important that the
borrower contact the Escrow Officer as soon as possible with the
name and telephone number of the insurance agent the borrower has
selected.
It is also a requirement of the lender that the
borrower furnish a policy of title insurance, which protects their
security interest in the property. The Escrow Officer will order
this title policy as part of the escrow process.
Once the loan is approved, the lender prepares
the loan documents and forwards them to the Escrow Officer who
will contact the buyer for an appointment to sign. The Escrow Officer
will prepare an estimated settlement statement and tell the buyer
the balance of the down payment and closing costs needed to close
the escrow.
What do the parties need to bring with
them when they come to the title company to sign?
- Identification in the form of a valid driver's
license or California I.D. Card, or a current valid passport.
Identification is required so the signing party's identity can
be verified by the notary public. Also, California's notary requires
that the notary obtain a thumbprint in the notary journal. This
is routine and for the protection on the signer.
- A cashier's check for the balance of funds
needed to close the escrow, made payable to First American Title
Company. A personal check may delay the closing since California's "good
funds" law imposes
specific time periods for the clearance of personal checks. A wire transfer
of funds directly to the escrow trust account can also be arranged.
When is "close of escrow"?
After the loan documents have been signed, they are returned to the lender
for review. When all the conditions of the lender and those contained in
the escrow instructions have been satisfied, the lender will forward the
loan funds to the escrow trust account. Once the documents are recorded,
the funds in the escrow are disbursed to the entitled parties and escrow
is "closed", The escrow officer will prepare the final settlement
statement, which is a detailed accounting of all receipts and disbursements
made through the escrow. Each party then receives a final settlement statement
from escrow.
Escrow Duties
- Receiving and holding all funds, instructions
and documents to the purchase
- Complying with the lenders requirements in
its instructions to escrow
- Requesting a preliminary title search and
report to determine the status of title to the property
- Requesting a beneficiary statement or payoff
demand from existing lenders
- Holding inspection reports, deeds and insurance
documents
- Preparing or obtaining the grant deed
- Prorating taxes, interest, insurance, rents,
and other costs related to the escrow
- Requesting the deed and other documents
- Notarizing documents
- Closing the escrow according to the instructions
of the buyer, seller, and lender
- Disbursing funds as authorized by the instructions,
including charges for real estate commission, loan payoffs, title
insurance, taxes, recording fees and other costs
- Preparing final statements as to the disposition
of all funds
Escrow Products
- At the close of escrow, the homebuyer will
have many important documents that over time can be misplaced
or damaged. The sturdy First American Folder keeps these documents
organized.
Buyers Package
- For buyers for whom we provide title insurance,
we provide a package that includes the Buyer's Estimated Closing
Statement, Preliminary Title Report, all loan documents, (CC&Rs)
Covenants, Conditions, Restrictions and Home Owner's Association
Documents, (if applicable) and Inspection reports.
Seller Package
- For sellers in our transactions, we provide
a package including the Sellers Estimated Final Closing Statement,
Preliminary Title Report, and Payoff, demands.
Lender Package
- For lenders in our transactions, we provide
a package that includes Escrow Instructions, Preliminary Title
Report, all signed loan documents, certified copies of the Note
and Deed of Trust, Proof of Fire Insurance, Buyer and Seller
Estimated Closing Statements, and Master HUD-I Statements.
Closing Package
- For each party involved in our transactions,
we provide packages including the Final Closing Statement, and
the HUD-I Statement.
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