An escrow is a financial arrangement where a third party holds and manages funds or assets on behalf of two parties involved in a transaction. Learn More
Money, property, a deed, or a bond put into the custody of a third party for delivery to a grantee only after the fulfillment of the conditions specified.
The principals to the escrow, or agents, will provide the escrow officer with a copy of the purchase contract, deposit and any necessary information for the escrow officer to prepare escrow instructions or supplemental escrow instructions. These instructions reiterate the specific requirements that have been agreed upon in order to close. Upon review and execution by both buyer and seller, the escrow holder will proceed in accordance with the escrow instructions. When all conditions of the escrow are met, the escrow holder will then have all necessary documents recorded and close the escrow. As escrow is a neutral third party, the escrow holder can only operate on written instructions. Therefore, it is important to be concise in instructing the agent and/or escrow holder.
The escrow company is normally chosen by the Buyer or Seller, but is often directed by either agent involved in the transaction, as they may already have a working relationship with an escrow company. Be aware that it is ultimately your choice in selecting your escrow company, based on your needs and wants.
Communication is the key to limiting the stress and pressure of obtaining loan approval, processing escrow and planning a move. Common closing delays are caused in the following areas:
- If any of the Buyers or Sellers will be out of town prior to the escrow closing date, contact your loan processor and Escrow Officer to discuss scheduling.
- Do not incur additional debt, change your employment status, etc. Your credit and employment may be verified again as late as the escrow closing date.
Valid picture ID required for closing document notarization (i.e., current drivers license, State ID, passport) - Apply for homeowner insurance coverage right away; don’t wait to the last minute, as coverage availability may be limited.
- All closing funds must clear the escrow trust account before escrow closing (wire transfers usually clear with 2-6 hours of origination;California cashier’s checks usually clear 24-48 hours after deposit; official, corporate or personal checks may take longer and cause closing delays).
Closing costs can differ depending on the type of transaction involved. Escrow fees are based on the value of the escrow; which is either the sales price or refinance loan amount. Other fees that may be incurred during the escrow are new loan financing charges, title fees, commissions, wire fees, messenger fees and notary services, but may vary based on the complexity or additional services required. The escrow holder has no control over the fees that are charged by outside parties. It is your right to request a closing statement to review the costs prior to the close of escrow.
Although the escrow holder completes an estimate prior to closing escrow, items such as fees and interest may change daily. A refundable pad is used to avoid any shortages when closing escrow. Any unused portion of the pad will be refunded at the close of the transaction.
The escrow holder must have a cashier’s check drawn on a California bank or funds wired in order to close escrow in a timely manner. This is because escrow funds must be “good” or cleared prior to the close of escrow. Personal checks can be accepted however, it will take up to 10 (ten) days to verify funds and for the check to clear.
Once documents have been recorded, the Escrow holder must wait for the wire transfer from the Title Company. This is usually received the day after recording. Upon receipt of said funds, the Escrow holder must balance the file and can then issue checks and closing statements.
