What is an Escrow
Questions Every Buyer and Seller Ask…

What exactly is escrow?
An escrow is an independent holding account. It protects the interest of both the buyer and seller. All the instructions, money, and documents needed for the sale are held by the escrow officer, usually at a title company. The escrow instructions tell the escrow officer what conditions must be met to satisfy the agreed upon terms of the sale. The escrow officer collects the money, such as the down payment and funds from the buyer’s mortgage. He or she collects such documents as inspection reports, bills for work performed, insurance documents, and the grant deed from the seller. When all the conditions in the instructions have been met,
the buyer and seller sign off on the instructions and then the escrow can be closed.

Q:How does the escrow
process work?

An escrow is an independent account, created just after the purchase agreement is signed, where all monies, instructions, and documents needed for the sale are held.

Some aspects of the sale are not part of escrow: agreements about which fixtures are included in the sale are between the seller and the buyer; loan negotiations are between the buyer and the lender.

How do I open an escrow?
Soon after the buyer and seller make a contract to purchase (and sell) the home, the real estate agent opens the escrow. The agent places the initial deposit from the buyer into an escrow account at a title company. If you are the seller, you also may have a “pre-escrow”. Ask your REALTOR® for details.

How do you know where the deposit money went?
The actual funds go into the escrow account at the title company. You usually receive written evidence of the deposit with your copy of the sale contract.

What information do I have to provide?
As a seller, you may be asked to complete a statement of identity with such information as date of birth and Social Security number. This confidential information is used to differentiate your from other people with the same name.

As the buyer, much of the information you need to provide is already included on your deposit receipt. You also need to provide your insurance agent’s name and number. Your real estate agent will help you provide all the necessary information.

How long does escrow take?
It depends on the terms of the sale. Escrow can take from a few days to several months; 30 to 60 days is typical.

What are escrow instructions?
The escrow instructions tell the escrow officer what conditions must be met before the sale can become final. The instructions are a written statement made by the seller and buyer to protect their interest. They list, in a debit and credit format, what is to become of the purchase funds. They also provide title protection for the buyer’s home.

When and where do I sign the instructions?
Near the end of the escrow period, the buyer and seller both sign the escrow instructions to show that they agree all the conditions have been met. Your escrow officer or real estate agent will let you know when it is time and arrange an appointment. If you are the buyer, this is when the escrow officer tells you exactly how much money you will need to bring to the appointment to close escrow (aside from your mortgage, which is sent directly form the lender to the escrow account).

The appointment my take place at the title company, your real estate agent’s office, or some other agree-upon location.
As a buyer, what do I need to do before this appointment?

Cashier’s check
Bring a cashier’s or certified check for the down payment & closing costs issued by a bank or financial institution, payable to the title company, for the amount your escrow officer tells you. Personal or out-of-state checks can delay the closing.

Lender’s Requirements
Check with your loan officer or real estate agent to make sure you have met all your lender’s requirements.

Hazard and Fire Insurance
If you are buying a detached home, your lender will require you to purchase hazard and fire insurance. You should order this as soon as your loan is approved, then let your escrow officer know your insurance agent’s name and phone number so he or she can make sure the policy meets your lender’s requirements.

Bring either a valid driver’s license or passport to the appointment. This is a routine, necessary step for your protection.

Name for the Title
Decide under what name and in what manner you with to hold title. Consult your lawyer, tax consultant, or other qualified professional about your options. 

Seek the advice of your attorney, tax consultant, or other qualified professional about exactly bow to take title to your new home.

What’s the next stop after the sign-off?
After you have signed all the necessary instructions and documents, the escrow officer returns them to the lender for one last review. This usually takes just a few days.

What is an “escrow closing”?
Closing is when title is legally transferred from the seller to the buyer. This happens when the lender finishes its finally review and sends the loan funds to the escrow account. The Grant Deed and Deed of Trust are recorded by the county, and the transition is final.

When will I receive the deed?
The County Recorder’s office will mail the original deed to you at your new home. This usually takes several weeks, or even longer if the office is very busy.

As the seller, when do I receive my sales proceeds?
Within a few days after the close of escrow, you will receive your funds and a detailed account of the sale. If you have questions about the accounting, call the title company or your REALTOR®. 

Waiting through the time and wading through the requirements of escrow can be a challenge, Your escrow officer and title company are there to professionally represent your best interest.