Buying

Financing  |  Find a Home  |  Make Your Wish List  |  Steps to a Successful Purchase  |  Create the Offer to Purchase  |  Negotiate with the Seller
Home Inspection  |  Appraisal  |  Removing Contingencies  |  Protecting Your Interests  |  Escrow Process & Final Settlement

Escrow Process & Final Settlement

What is an Escrow?

Escrow is the deposit of documents and funds with a neutral third party with specific instructions as to how they should be disbursed. The term "escrow" also denotes a time period during which certain actions have to be completed by the Buyer and Seller of real estate.

In California, a title company acts as the escrow holder, and is the clearing house for the exchange and distribution of documents and funds in connection with transfer or financing of real property. In Sonoma County, there are eight major title companies. Choice of the title company is usually up to the Buyer, but in certain situations, the choice has been predetermined by the Seller.

The escrow officer, an employee of the title company, will explain the documents and have you sign them. The officer will then assure completion of the transaction by delivering the signed documents to the lender and sending the deed to the county for recordation.

Why is escrow important to me?

You cannot get a loan without it. Escrow, or the services of a qualified escrow agent, assures all interested parties that the rules and regulations governing real property transfers will be strictly observed by a neutral third party with an objective interest in completing the transaction.

An escrow agent represents neither the Seller nor the Buyer. The escrow agent can act only on each party's behalf according to their written instructions or the instructions of their agents.

What escrow services does the title company provide?

The basic definition of an escrow agent's responsibility is to accept and hold a deed from the Seller in exchange for funds from the Buyer. The escrow agent will concurrently, when all mutually agreed terms have been satisfied, release the funds to the Seller and deed to the Buyer.

In most sale transactions, this "simple" process requires the escrow agent to:

• Order a title report on the subject property and obtain all the necessary information to clear any title defects and satisfy existing liens and encumbrances against the property or the principals involved in the sale;
• Order a payoff demand to determine how much is owed on the Seller's mortgage, down to the penny.
• Make sure that all instructions from the Seller, Buyer, and Buyer's lender are followed.
• Prepare an estimated closing statement for both parties and review other documents to make certain they conform to the parties' instructions;
• Prepare a policy of title insurance, which protects the Buyer against any ownership claims by third parties on the property being purchased;
• Draw up a promissory note and deed of trust if there is Seller financing on the property.
• Figure tax and interest prorations on all properties and rental and deposit prorations on rental properties.
• Arrange closing appointments for all parties to sign the necessary documents.
• Make sure that all necessary documents are signed by Buyer and Seller and notarized where required.
• Check all documents for completeness, compliance, and accuracy.
• Return copies of all loan documents to the lender for approval to record.
• Make sure the balance and the loan funds are deposited (this usually happens the day before closing).
• Record all necessary documents in the county where the property is located. This constitutes "closing."
• Disburse all funds out of the escrow account according to the signed, written instructions. (This could include giving the Seller his net proceeds, paying off the Seller's mortgage, paying the Broker's commission, paying any delinquent property taxes, and making any other payments required for loan approval or to satisfy other terms of the agreement.)
• Prepare and distribute final closing statements to all interested parties.

How much does an escrow cost and who pays for it?

In a typical sale transaction, the title and escrow fees are based on the purchase price. In Sonoma County, these fees are traditionally paid by the Buyer. The usual cost is between one thousand and two thousand dollars for a medium-price home.

Marlene Lily The Samson Group 444 Tenth Street, Suite 202 Santa Rosa, CA 95401 Phone: 707-328-3606 E- mail: Marlene@pon.net