One question our team receives quite often is, “What does escrow do in the real estate transaction” or “How does escrow help in the real estate transaction?”
Both of these questions are very important, so we wanted to share with you our answers.
Anyone who’s been involved in selling or buying a home knows that escrow can feel complicated, especially to first-time home buyers or home sellers.
Our goal is to educate our clients so they not only understand escrow’s role, but also feel like they have the information needed to feel comfortable and confident with the process. So, let’s dive into some more information..
First and foremost, an escrow officer’s primary responsibility is to remain an unbiased, third-party between both the home buyer and home seller at all times throughout the real estate transaction.
Also, the escrow officer is not to involved in any type of negotiations between any parties, including the buyer, the seller, agents and lender.
In addition, escrow officers are responsible for the following:
- During escrow: receive and hold buyer’s funds in a non-interest paying trust account.
- Review and comply with all agreements as detailed in the Purchase Contract and Joint Escrow Instructions as it pertains to the escrow process.
- During escrow: follow mutually signed, written instructions agreed upon by buyer and seller.
- Manage the preparation of Escrow Instructions/General Provisions, Amendments, Grant Deed (for seller’s signature), Estimated Closing Statement and any other documents required to clear title or that are required by the new lender.
- Depending on the scenario: Often reports are ordered by the buyer, seller or agents outside of escrow, but there are times when the escrow officer will obtain reports as required by the purchase contract and provide same to the buyer during escrow for their review.
- Ensure that escrow is in receipt of buyer and seller signatures on Purchase Agreement and Joint Escrow Instructions, Escrow Instructions/General Provisions, Grant Deed, any Amendments, Estimated Closing Statements and any other documents required during escrow.
- Receive the loan documents from the buyer’s lender (when applicable) and prepare amendments and estimated closing statements as required by the lender based on lender’s instructions.
- Based on the requirement of the new lender, order the evidence of insurance from the buyer insurance agent.
- Send the signed loan documents and all lender required items to the new lender for funding.
- Submit original recordable documents and any releases required to clear title to the title company for recording at the close of escrow.
- Ensure that escrow is in receipt of all funds necessary to pay the seller their proceeds as well as all invoices agreed upon by buyer and seller during escrow.
- Ensure that the seller has sufficient equity in the property to cover all costs, payoff of liens and any invoices agreed upon by buyer and seller during the escrow.
- Make sure that all of the required paperwork is in escrow to provide the buyer with clear title to the property.
- Ensure that all the conditions agreed upon by the buyer and seller on the purchase agreement and in writing through escrow have been satisfied prior to closing the escrow and transferring the property into the buyer’s name
We hope that this list provides some helpful and informative guidance around the role of an escrow officer in a real estate transaction.
Buyers and sellers should know that they will be receiving other items that may require signatures from their agents and lenders directly.
Of course, if you have any questions about the escrow process or are interested in opening escrow with our team, please contact us. We’re here to help make your experience as pleasant and efficient as possible!