A buyer, seller and lender have certain biased interests in any real estate transaction. Escrow is a nonbiased entity that protects all parties. This is why escrow was developed. As a buyer, seller, or lender, you want to be certain all conditions of sale have been met before property and money change hands. Escrow is defined as a procedure in which a third party acts as a stakeholder for both the buyer and the seller, carrying out both parties’ instructions and assuming responsibility for handling all the paperwork and distribution of funds.
The job of the escrow holder is to impartially carry out written instructions given by the principals. This includes receiving funds and documents necessary to comply with those instructions, completing or obtaining required forms, and handling final delivery of all items to the proper parties upon the successful completion of the escrow.
The escrow needs all necessary information to close the transaction. This includes terms of sale, any seller-assisted financing, requests for payment for various services pertinent to escrow, tax statements, fire and other insurance policies, title insurance policies and loan documents, among other miscellaneous items. It is the buyer’s responsibility to make the necessary arrangements for new financing. Finalized documentation of the new loan agreement must be presented into the escrow before the property transfer can take place. Your Realtor can help you identify appropriate lending institutions.
When all instructions in the escrow have been carried out, the closing can take place. This is when all outstanding funds are collected and all fees are paid; such as title insurance premiums, pest inspection/treatment charges, real estate commissions, etc. Under the terms of the escrow instructions, title to the property is then transferred and appropriate title insurance is issued.
- Serve as the liaison to all parties in the transaction
- Act as a neutral “stake-holder”
- Prepare escrow instructions; requests a preliminary title search or title commitment to determine the present condition of title to the property
- Comply with the lender’s requirements as specified in the escrow agreement
- Receive purchase funds from the buyer
- Prepare or secure the deed or other documents related to escrow; prorates taxes, interest, insurance and rents according to instructions
- Secure releases of all contingencies or other conditions required
- Records deeds and any other documents as instructed
- Close escrow when all instructions from buyer and seller have been carried out
- Disburse authorized funds
- Prepare final statement
Escrow does not:
- Offer legal advice
- Negotiate any transaction
- Offer investment advice