Quickly find answers to various questions frequently asked by our clients. If you are unable to find the answer to your question, please do not hesitate to contact our office and we will be happy to help.

What is Escrow?

California Escrow Law, Section 17003 of the Financial Code, provides the legal definition of escrow: a deposit of funds, a deed, or other instrument by one party to be delivered to another party, upon completion of a particular condition or event.

Why Do I Need an Escrow?

Whether you are the Buyer, Seller, Lender or Borrower, you want the assurance that no funds or property will change hands until all of the instructions in the transaction have been followed. The Escrow holder has the obligation to safeguard the funds and / or documents while they are in its possession, and to disburse funds and / or convey title only when all provisions of the escrow have been complied with.

How Does Escrow Work?

The Principals to the escrow: Buyer, Seller, Lender, Borrower, cause escrow instructions, most usually in writing, to be created, signed and delivered to the Escrow Officer. If a Broker is involved, he will normally provide the Escrow Officer with the information necessary for the preparation of your escrow instructions and documents.

The Escrow Officer will process the escrow, in accordance with the escrow instructions, and when all conditions required in the escrow can be met or achieved, the escrow will be “closed.”

The duties of an Escrow holder include: following the instructions given by the Principals and parties to the transaction in a timely manner; handling the funds and / or documents in accordance with the instruction; paying all bills as authorized; responding to authorized requests from the principals; closing the escrow only when all terms funds in accordance with instructions, and provide an accounting for same – the Closing or Settlement Statement.

Who Chooses the Escrow?

The selection of the Escrow holder is normally done by agreement between the Principals. If a Real Estate Broker is involved in the transaction, the Broker may recommend an Escrow holder. However, it is the right of the Principals to use an Escrow holder who is competent and who is experienced in handling the type of escrow at hand. There are laws that prohibit the payment of referral fees. This allows for the best possible escrow services without any compromise generated by a person receiving a referral fee.

When do I open an Escrow?

As soon as you and your other party are in complete agreement, a mutually selected escrow officer should be called. Consider the professional advice of your real estate agent.

What does the Escrow Officer need from me?

Along with the terms of the sale the following are a short list of items that maybe helpful to expedite your transaction.

Seller:
  1. Recent existing lender statement(s), if applicable.
  2. Current Home Owner Association documents.
  3. Recent structural pest control report (if required).
Buyer:
  1. Complete names & vesting (seek tax advice as to consequences of how you take title).
  2. Initial deposit check.
  3. Terms of financing and new lenders name.
  4. Insurance agent information.

What does the Escrow Officer do?

Prepare instructions and specific documents. Where applicable, order all necessary payoff statements, order demands for liens, homeowner association statements and title search. Secure releases of existing liens of record and disburses documents in accordance with mutual written instructions, where applicable. Prepare all final statements for principals, accounting as to the disposition of all funds deposited with the escrow officer. Provide you with the assistance to close your transaction quickly and effectively.

What advice can I get from the Escrow Officer?

Remember, an escrow officer cannot give legal advice, nor tax advise. The purpose of escrow is to carry out the mutual instructions of the buyer and seller. If there are any disagreements between the principals, the escrow officer remains neutral until an agreement is negotiated. The escrow officer does not become involved in the negotiations.

Who pays the fees & costs?

The charges of a transaction are dependent on the type and complexity of your transaction and the terms of your agreement. The seller typically pays for those costs involved in assuring the buyer a clear title and the buyer typically pays for any costs involved in the financing. The escrow fees are normally paid one half each. There are exceptions to the rules, so be sure to consult your professionals for help.

Who can answer my questions?

Your primary consultant should be your real estate agent / broker if the negotiations have been conducted through them. The escrow officer will often ask you to refer to your real estate agent/broker, legal counsel, and/or quite possibly a tax advisor.

What happens if the transaction cancels?

A cancellation agreement must be reached between the parties with mutual written instructions calling, with live signatures, for the disposition of any funds and/or documents. If mutual instructions to cancel are not reached, then the party that wants to cancel or delay the closing, should instruct escrow holder immediately in writing. Payment of any charges incurred should be considered including fees and costs incurred by the lender, homeowners association, title company and escrow holder. If the parties cannot agree, a court order may be needed.

When can the Buyer receive the keys and who will provide them to the Buyer?

Typically, when the Escrow Officer confirms that the recording is completed, the Real Estate Agents are notified and the keys can be provided to the Buyer by their Agent. If there are no agents involved the parties are notified of closing and keys can be provided to the buyer.

What should the Buyer bring to their loan document signing appointment?

The Buyer must present identification in a form acceptable to the Notary Public. The identification must be current or have been issued within five (5) years. Common forms of acceptable identification include:

  • An Identification Card or Driver’s License issued by the California Department of Motor Vehicles.
  • A Driver’s License issued by a state other than California or by a Canadian or Mexican public agency authorized to issue drivers’ licenses
  • A passport issued by a foreign government
  • A passport issued by the Department of State of the United States
  • An identification card issued by any branch of the armed forces of the United States

When should the Buyer deposit their closing funds?

The Buyer’s funds in the form of a wire transfer must be deposited in escrow 24 – 48 hours prior to authorization of recording with the title company.

At closing, when can the Seller expect to receive the net proceeds?

Once the recording is completed, the Escrow Officer must wait for written confirmation from the title company that the Deed has recorded and then escrow holder can release funds to the seller. If the seller requests the net sale proceeds in the form of a WIRE, it will be sent on the next business day after this information is received. A standard trust accounting check can be issued on the same day that confirmation is received from our Bank.

After the Buyer signs the loan documents, when will the escrow close?

The closing date is established by the parties and stated in the Purchase Contract. Typically, the escrow will close 2-3 days after the Lender has received the signed loan documents. During this time, the documents are reviewed by the Lender, and the loan funding is scheduled. The Escrow Officer will work closely with the new Lender to coordinate the scheduling of these final details.

Why is it recommended the Escrow Officer not accept personal checks at the time of closing?

An Escrow Officer is only allowed to close an escrow when all deposited funds have been collected and cleared. Deposits by personal check are subject to clearance and verification of payment by the financial institution on which the funds were drawn. The check clearing process may be delayed one (1) to ten (10) business days if the check is drawn on an out-of-state bank. The Escrow Officer will request closing funds in the form of a wire transfer or cashier’s check in order to prevent closing delays.

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