Escrow? What is that?

First time home buyers do not have a clue about a lot of the language and the processes that go on in a real estate transaction.

It is a good thing to sit down and explain the process……

Escrow-Is the time period from when your purchase offer was accepted to the end when the lender releases the funds.

You have contingency periods built into your contract. Usually for the loan, appraisal, inspections and review of disclosures as required by law from the seller. Those periods can vary but can run from 10 days to 21 days or so. In other words the buyer must be completely satisfied before proceeding with the purchase and has the ability to renegotiate with the seller or just walk away without penalty.

Failure for the buyer to comply with the contingency period delays could result in buyers loss of earnest money.

In California it is a 3rd party no interest entity that monitors and communicates with both sides of the deal, that means the sellers and buyers.

The buyer has the right to pick and choose the escrow company. Since many buyers do not have any idea of whom to choose the buyers agent will recommend a few for the buyer to pick from.

The escrow holder, in our area we use a Title company, will receive the buyers earnest money check and deposit it in a non interest bearing account. That monies will be used towards the loan or closing costs as set forth by your lender at close of escrow. Any excess monies left over will be turned directly over to the buyer after closing. If the escrow falls out(buyer changes mind , something comes up that cannot be agreed upon to repair or replace etc) the title officer will release back to the buyer those earnest money funds upon written and signed instructions from the seller and the buyer.

The title company accepts the contract , disclosures and any reports. Any services used such as inspectors by either the seller or buyer or both will place a demand in escrow for payment of their services. The escrow company will follow the contractual guidelines as to whom pays what and will ensure those entities are paid at the final close of escrow.

The title company will generate a HUD-1 statement based upon the purchase price, lenders fees, realtors fees, vendor fees and any other property related expenses related directly to the sale to ensure the proper entities are paid and to verify the correctness of the purchase price and all of the fees associated with the loan itself.

The title company will actually run a Title review and present to the buyer  a preliminary title report, confirming who is the legal owner, show if there is any liens, CC&R’s if applicable, HOA documents if applicable and describes the legal definition of the property with a plat map.

The title company and/or officer CANNOT negotiate and/or change any of the contracts. They will however revise any information as long as they have received permission in writing from all sides involved.

The lender sends to the title officer loan documents and along with those documents any demands  needed before they will fund. The title officer will ensure that the criteria needed will be met and in proper form.

The buyer has the right to review any and all documents and to approve of such.

Will notify both parties upon completion of all the needed information and will bring in the parties to sign the documents which are then packed up and sent back to the lender before the lender will releas the funds to close escrow.

Buyer will be given copies of everything signed and escrow will usually close within a few days from the signing of all documents including the loan and deed of trust.

Depending on which side of the coin you are on as buyer or seller your Realtor will also monitor to ensure there are no snafus and will coordinate the signings.