At Glen Oaks Escrow we strive to make your escrow as easy as possible. We know you may have many questions regarding escrow, so here we have provided answers to the most common questions we receive. We also have the Glen Oaks Escrow blog where we strive to educate home buyers, home sellers, and Realtors on the details of escrow which make the transaction run smoother. If your question is not answered on our site (you can search from the box in the header if you’d like), please ask us your escrow question or contact us further information.
Frequently Asked Questions:
- What is Escrow?
- What is escrow officer impartiality?
- What are escrow instructions?
- Who does what in the escrow process?
- What is involved in closing escrow?
- How are the charges divided?
- Why does escrow exist?
- What Is For Sale By Owner (FSBO)?
An escrow is an arrangement in which a neutral third party, called an escrow holder, holds legal documents and funds on behalf of a buyer and seller, and distributes them according to the buyer’s and seller’s instructions. People buying and selling real estate often use an escrow for their protection and convenience. The buyer can instruct the escrow holder to disburse the purchase price only upon the satisfaction of certain prerequisites and conditions. The seller can instruct the escrow holder to retain possession of the deed to the buyer until the seller’s requirements, including the receipt of the purchase price, are met. Both rely on the escrow holder to carry out faithfully their mutually consistent instructions relating to the transaction and to advise them if any of their instructions are not mutually consistent or cannot be carried out.
An escrow is convenient for the buyer and seller because both can move forward separately and simultaneously in providing inspections, reports, loan commitments, funds, deeds, and many other items, using the escrow holder as the central depositing point. If the instructions from all parties to an escrow are clearly drafted, fully detailed, and mutually consistent, the escrow holder can take many actions on their behalf without further consultation (this leaves much time and facilitates the closing of the transaction).
An escrow officer must remain completely impartial throughout the entire escrow process. He or she will usually adopt a courteous but rather formal manner when dealing with parties to the escrow, keeping conversations to the matters at hand in escrow. This formal behavior is meant for the benefit of all concerned, since the escrow officer must follow the instructions of both parties without bias.
Escrow instructions are written documents signed by the parties giving them, which direct the escrow officer in the specific steps to be completed so that the escrow can be closed. Typical instructions would include the following: The method by which the escrow holder is to receive and hold the purchase price to be paid by the buyer. The conditions under which a lapse of time or breach of purchase contract provision will terminate the escrow without a closing.
The instructions and authorization to the escrow holder to disburse funds for recording fees, title insurance policy, real estate commissions, and any other closing costs incurred though escrow. Instructions as to the proration of insurance, taxes and possibly home owner’s association dues. Instruction to the escrow holder on the payment of property liens and charges against the property and distribution of the new sale proceeds. Since the escrow holder can only follow the instructions as stated and may not exceed them, it is extremely important that the instructions be stated clearly and be complete in all details.
- Deposits proceeds of the loan to the purchaser.
- Directs the escrow holder on the conditions under which the loan funds may be used.
The Escrow Holder
- Opens the order for title insurance.
- Obtains approvals from the buyer on title insurance report, pest and other inspections. Receives funds from the buyer and/or any lender. Prorates insurance, taxes, rent, etc.
- Disburses funds for title insurance, recordation fees, real estate commissions and lien clearance. Prepares a final statement for each party, indicating amounts to be disbursed for services and any further amounts necessary to close escrow.
- Records deed and loan documents, delivers the deed to the buyer, loan documents to the lender and funds to the seller, closing of escrow.
- Deposits the executed deed to the buyer with escrow holder.
- Deposits evidence of pest inspection and any required repair work
- Deposits other required documents such as tax receipts, address of mortgage holder, insurance policies, equipment warranties or home warranty contracts, etc.
- Deposits the funds required, in addition to any borrowed funds, to pay the purchase price with the escrow holder.
- Deposits funds sufficient for home and title insurance. Arranges for any borrowed funds to be delivered to the escrow holder.
- Deposits any deed of trust or mortgages necessary to secure loans.
- Approves any inspection reports, title insurance commitments, etc. called for by the purchase and sale agreements.
- Fulfills any other conditions specified in the escrow instructions.
Once all the terms and conditions of the instructions of both parties have been fulfilled, and all closing conditions satisfied, the escrow is closed and the safe and accurate transfer of property and money is accomplished.
The method of dividing the charges for the services performed though escrow or as a result of escrow varies from place to place. The fees and service charges to be divided might include, for example, the title insurance policy premium, escrow fee, any transfer taxes, recording fees, and cost in connection with any loan being obtained. Unless there is some special agreement between the buyer and seller as to how these charges are to be paid, local custom will generally be followed in drafting the instructions to the escrow holder as to how they are to be delivered.
The escrow process was developed to help facilitate the sale or purchase of your home. The escrow holder accomplishes this by:
- Acting as the impartial “stakeholder”, or depository of documents and funds.
- Processing and coordinating the flow of documents and funds.
- Keeping all parties informed of progress on the escrow.
- Responding to the lender’s requirements.
- Securing a title insurance policy.
- Obtaining approvals of reports and documents from the parties required.
- Prorating and adjusting insurance, taxes, rents, etc.
- Recording the deed and loan documents.
- Maintaining security and accountability of moneys owed and owing.
Since the escrow holder can only follow the instructions as stated and may not exceed them, it is extremely important that the instructions be stated clearly and be complete in all details.
Homeowners frequently choose to sell their homes themselves in order to save money by avoiding additional costs. This choice changes the number of parties involved, but it does not change the overall process of escrow. We recommend using a licensed escrow company.
Whether you choose to sell your home yourself or work with a listed agent, Glen Oaks Escrow can work with you to guide you through the process and assist you in a satisfying and efficient transaction.
One of the most important steps to cover when selling your own home is to ensure all offers and agreements are put into detailed writing. Escrow companies often offer standard contracts to assist you in the documentation process, so be sure to call us today to see how we can help.
The contract between an agent and an Escrow Officer is typically standard, but the format and choices change for clients who choose to sell their own homes. It is important to consider whether you want to work with us for title insurance, home security, disclosure companies for natural disaster damages, and any extermination fees you may require. In addition to assisting you with a purchasing contract and the escrow process, we can also assist you with finding the best local companies to take care of your closing needs.