The Escrow Process

We hear the term escrow a lot, but did you ever wonder exactly what it is?

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 these terms of the 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 Officer takes instructions based on the terms of your Purchase Agreement and the lender's requirements.  The Escrow Officer can hold inspections reports and bills for work performed as required by the Purchase Agreement.  Other elements of the escrow include hazard and title insurance and the grant deed from the seller to you.  Escrow cannot be completed until these have been satisfied and all parties have signed escrow documents. 

What Does the Escrow Holder Do?

The escrow holder is a neutral third party that maintains the escrow and impartially oversees the escrow process, ensuring that all conditions of the sale are properly met.

The escrow holder's duties include:

• Serve as the neutral agent and the liaison between all parties involved.
• Prepare the escrow instructions.
• Request a 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.

 How Do I Open an Escrow?
When your offer has been accepted, your Real Estate Agent will open escrow.  As soon as you execute your Purchase Agreement, he/she will place your initial deposit (earnest money) into an escrow account.

Written evidence of the deposit is generally included in your copy of the sales contract.   The funds will then be deposited in a separate escrow account and processed through your local bank.  You will receive a receipt for the funds from the escrow company.


What Information will I have to Provide?
You may be asked to complete a Statement of Identity as part of the paperwork.  Because many people have the same name, 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 45 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, grant deed, and final papers.  At this time, your Escrow Officer will also tell you the amount of money you will need to bring in.