So, you finally found the home you want to buy and get your offer accepted….now what???
You open escrow!!!
The Escrow Process:
What is an escrow?
Buyers and sellers of a piece of property establish terms & conditions for the transfer of ownership of that property. These terms, conditions and instructions are given to a neutral third party known as the escrow holder. The escrow holder in turn has the responsibility of seeing that the terms and instructions are carried out. Escrow is an independent neutral third party and the vehicle by which the interest of all parties to the transaction are protected.
How does the escrow process work?
The escrow office takes instructions based on the terms of your purchase agreement and the lender’s requirements. The escrow officer can hold inspection reports and bills for work performed as required by the purchase agreement. Other elements of escrow include hazard and title insurance, and the grant deed from the seller to you. Escrow cannot be completed until these items have been satisfied and all parties have signed the escrow documents.
What does the escrow holder do?
The escrow holder is a neutral third party that maintains the escrow and impartially oversees the escrow process, insuring that all conditions of the sale are properly met.
The escrow holders duties include:
- Serving as the neutral third agent and the liaison between the parties involved
- Preparing the escrow instructions
- Requesting a preliminary title search to determine the status of title to the property
- Requesting a beneficiary’s statement if debt or obligations are to be taken over by the buyer
- Complying with the lenders requirements as specified in its instructions to escrow
- Receiving and handling purchase funds from the buyer
- Preparing or securing the deed and other related documents
- Prorating taxes, interest, insurance & possibly rents
- Securing releases of all contingencies or other conditions imposed on escrow
- Recording the deed and any other documents
- Requesting a title insurance policy
- Closing the escrow pursuant to instructions supplied by the Seller, Buyer and lender if any
- Disbursing funds as authorized by the instructions, including charges for title insurance, recording fees, real estate commissions and loan payoffs
- Preparing final statements for all parties that account for the disposition of all funds held in escrow
How do I open escrow?
My team and I, as your real estate agent, will open escrow. As soon as you execute the Purchase agreement, I will open escrow, get the account number and wiring instructions to deposit the down payment. The funds will then be deposited in a separate account and processed through your local bank. You will receive a receipt for the funds deposited from the title company.
What information will I have to provide?
You may be asked to complete a statement of identity as part of the paperwork. Because many people have the same name, the statement of identity is used to identify the specific person involved in the transaction through such information as date of birth, social security number, etc. This information is held in strict confidence.
How long is escrow?
The length of escrow is determined by the terms of the purchase agreement and can range from a few days to several months. The average length of a cash escrow is 7-10 days and 30-45 days for a traditional financing purchase.
When do I sign escrow instructions and where?
A few days before closing, your escrow officer or I will contact you to make an appointment for you to sign your escrow instructions, grant deed and final papers. At this time, your escrow officer will also tell you the amount of money you will need to provide at closing.
This is a list of items you will need in preparation for your appointment to sign escrow papers:
- Identification – All parties – There are several acceptable forms of ID. One of the following forms must be presented at the escrow signing in order for the signature to be notarized: A current driver’s license, passport or state of CA department of motor vehicle ID card.
- Cashier’s check – Buyers you need a cashier’s check or a certified check issued by a CA financial institution made payable to the title company in the amount given by your escrow officer. You may also wire funds.
- Lenders Requirements – Buyers – check with your lender to make sure you have satisfied all your lenders requirements before coming to the title company to sign papers.
- Fire & Hazard Insurance – Buyers – You must have fire and hazard insurance in place before the lender will send money to the title company to fund your loan. Once you have spoken to your insurance agent, call your title officer with the insurance agents name & phone number so they can make sure the policy complies with your lenders requirements.
After your appointment
After all parties have signed the necessary papers, your escrow officer will return the buyers loan documents to the lender for a final review. This review usually occurs within a few days of execution of the documents. Once review is completed, the lender will call your escrow officer so that the necessary final paperwork can be completed to record the documents and close escrow.
The escrow closing is the legal transfer of title to the property from the seller to the buyer. Usually the Grant Deed & the Deed of Trust are recorded within one day of the title company’s receipt of loan funds. This completes the transaction and signifies the close of escrow. Once all the conditions of escrow have been satisfied, your escrow officer will inform you of the date escrow will close and take care of all the technical & financial details.
When will I get the Deed?
The Deed to your new home will be mailed directly to you by the County Recorder’s Office several weeks after the close of escrow. Be sure to keep it in a safe place, i.e.…Safe deposit box.
What is Title Insurance?
Title insurance is a contract of indemnity, which guarantees that the title to a property is as reported and, if not as reported & the owner is damaged, the title policy covers the insured for losses up the amount of the policy. Title insurance assures owners that they are acquiring marketable title. Title insurance is designed to eliminate risk or loss caused by defects in title from the past. Title insurance provides coverage only for title problems, which were already in existence at the time the policy was issued.
Your title company works to eliminate risks by performing a search of the public records or through its own plant. The search consists of public records, laws & court decisions pertaining to the property to determine the current recorded ownership, any recorded liens or encumbrances or any other matters of record that could affect the title to the property. When a search is complete, your title company will issues preliminary report detailing the current status of title. A preliminary report contains vital information which can affect the close of escrow: ownership of the subject property, how the current owner holds title, matters of record that specifically affect the subject property or the owners of the property, a legal description of the property and an informational plat map.
What does a Title Policy Not Cover?
Not all risks can be determined by a title search, since certain things such as forgeries, identities of persons, incompetency, failure to comply with the law, or incapacity cannot be disclosed by an examination of the public records. Matters that a physical examination or a survey of the property might disclose are not covered. However, more extended coverage is available and should be considered.
The California Land Title Associations (CLTA) is the standard policy of title insurance in California and is used to cover either an owner’s or lender’s interest.
What Does a CLTA Policy Cover?
- Ownership of the property
- All recorded matters affecting title are shown in the policy in order of their priority
- That there is access if the property abuts upon an open public, dedicated street
- That there are no forgeries or failed conveyances in the chain of title
- That the insured has a marketable interest in the real property
- With regard to lenders coverage, it covers:
- The priority of the insured mortgage
- The invalidity or unenforceability of the lien of the insured assignment
- The invalidity or unenforceability of the lien of the insured mortgage on the title.