Buyers' Question & Answer Guide

What is an escrow?

When opening an escrow, the buyer and seller establish terms and conditions for the transfer of ownership of that property. These terms and conditions are given to a neutral third party known as the escrow holder. The Escrow Officer, in turn has the responsibility of seeing that the terms of escrow are carried out. The escrow is an independent third party - the vehicle by which the interest of all parties to the transaction are protected.

How does the escrow process work?

The escrow is a depository for all monies, instructions, and documents necessary for the purchase of your home. These include your funds for down payment, your lenders funds, and documents for the new loan. Generally, the Buyer deposits a down payment with the Escrow Holder, and the Seller deposits the deed and any other necessary papers with the Escrow Holder. Prior to close of escrow, the Buyer deposits the funds required and agreed upon by the parties to the sale with the Escrow Holder. The Buyer instructs the Escrow Holder to deliver the monies to the Seller when the Escrow Holder:

1. Records the deed, and
2. Delivers to the Buyer a policy of DDE insurance which shows title to the property vested in the name of the Buyer.

The Escrow Holder is authorized to deliver the deed to the Buyer when the Buyer has deposited the agreed-upon purchase price and fulfilled any other conditions specified in the escrow instructions. The Escrow Holder handles the prorations and adjustments on any fire/hazard insurance, real estate taxes, rents, interest, etc., based on the escrow instructions of both parties.

The Escrow Holder thus acts for both parties and protects the interests of each within the authority of the escrow instructions. Escrow cannot be completed until the instructions have been satisfied and all parties have signed escrow documents. The Escrow Holder takes instructions based on the terms of the Purchase Agreement and the Lenders requirements.

How do I open an escrow?

Your Real Estate Agent will open escrow for you. As soon as you execute your Purchase Agreement, and Joint Escrow Instructions, your agent will place your initial deposit into an escrow account.

How will I know where my money has gone?

Written evidence of your deposit is generally included in your copy of the Purchase Agreement and Escrow Instructions. Then your funds will be deposited in a separate escrow or trust account and processed through a local bank.

What information will I have to provide?

Because many people have the same name, you may be asked to complete a Statement of Identity as part of the paperwork. 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 strictly confidential.

How long is an escrow?

The length of an escrow is determined by the terms of the Purchase Agreement and can range from a few days to several months. The average length of an escrow is usually 60-90 days.

When do I sign escrow instructions and where?

A few days before closing, your Escrow Officer or your Realtor will contact you to make the appointment for you to sign your Escrow Instructions, and final papers. At this time, your Escrow Officer will also tell you the amount of money you will need to bring in.

The Escrow Holder's duties include:

-Serve as the neutral agent and the liason between all parties involved.
-Prepare the escrow instructions.
-Request Preliminary Title Search to determine the status of the title to the property.
-Comply with the lender's requirements as specified on its instructions to escrow.
-Receive and handle purchase funds from the buyer.
-Prepare or secure the deed and documents related to the escrow. Prorate taxes, interest, insurance and rents.
-Secure releases of all contingencies or other documents imposed on the escrow.
-Request the deed and any other documents.
-Close the escrow pursuant to instructions supplied by the seller, buyer, and lender, if any.
-Disburse funds as authorized by the instructions, including charges for title insurance, recording fees, real estate commissions and loan payoffs.
-Prepare final statements for all parties involved that account for the disposition of all funds held in the escrow account.