The word derives from the Old French word escroue, meaning a scrap of paper or a roll of parchment; this indicated the deed that a third party held until a transaction was completed.
A typical escrow involves five primary parties: a buyer, seller, lender, borrower and escrow officer.
During the escrow process, the escrow officer will carry out instructions dictated by the parties. These steps can include any of the following and are unique to each home:
With the hundreds of options out there, picking a valuable escrow partner can make the difference between a smooth contract or a delayed process costing you and your client thousands.
It’s critical that you research potential escrow partners with criteria in mind. Here is what we recommend you judge your potential escrow partner on:
The best escrow partner is someone who can serve as a completely neutral third party, with no ties to real estate companies or mortgage firms that might influence their actions. You should always ask more questions about “in house escrow” or shared ownership arrangements.
The California Department of Business Oversight can verify if an escrow agent is truly independent (meaning the individual and his or her company has “met and satisfied all of the licensing requirements” set forth by California escrow law).
The Right Experience and Resources
At the very least, you want an escrow partner who has substantial experience in this field. It is recommended that you make a quick call to review experience and make sure there is a good personality fit with your escrow team.
Beyond that, it’s important to learn about their distinctive value proposition and whether they have the resources to meet your specific needs. The most qualified escrow partner will use technology to make things easier for you, including:
On average, escrow lasts between 30 – 45 days. This is dependent on many factors, but most importantly the swift collection of critical documents and timely processing from all parties involved (e.g. buyer, seller, real estate agent, loan officer, etc.)
Yes! Choosing an escrow officer is much like choosing your real estate agent. Get several referrals from trusted sources and then compare services, cost and convenience.
Escrow begins when a seller accepts a buyer’s offer and an escrow agent or company is selected. It’s important the escrow officer educates the real estate agent and clients on important steps during escrow—especially steps that require client involvement and time.
Those Steps include:
Request for Documents. Working together with the real estate agent, the escrow holder compiles a set of joint escrow instructions. These documents outline how funds held in escrow should be disbursed. Both parties must sign the documents before moving forward.
“Good Faith” Deposit. The buyer places a “good faith” deposit (typically one to three percent of the purchase price of the house) into the escrow trust account.
The Loan-Approval Process. Since approval of a bank loan is the most time-consuming element in the process, buyers are advised to fill out a loan application as soon as possible. This includes supplying the lender (a bank or mortgage company) with key financial information (bank statements, tax returns, paycheck stubs, etc.).
Seller’s Disclosure. According to law, the seller is obliged to disclose any known problems with the house. This often takes the form of an extensive property questionnaire to be filled out by the seller early in the escrow process.
Title Search. The escrow holder requests a Preliminary Title Search to be made of public records (deeds, mortgages, paving assessments, liens, wills, divorce settlements, etc.). This will establish whether there are any existing claims to the property (other than the present owner’s). The escrow holder then prepares a preliminary title report for review by all parties. Any problems must be resolved before the process can continue.
Property Appraisal. The lender schedules an appraisal of the property to assess its physical condition and address any defects or issues. This may include a pest inspection. The goal is to assure both buyer and lender that the house is in order and there are no threats (such as termites) to its structural integrity. The cost of repairs is negotiated between buyer and seller or may be deducted from the purchase price of the house.
Documents Prepared for Signatures. Once the seller’s loan application is approved, the required documents are sent to the escrow company. The escrow agent also prepares other key documents, such as a settlement statement, warranty deed and any documentation required by the IRS.
Contact us today to meet with an escrow officer and learn about some of our unique offerings:
619.327.2288 | firstname.lastname@example.org
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