What Is Escrow?

Home Escrow is defined as a neutral party holding funds and documents until all parties to the escrow have performed.  All instructions to escrow are requested in writing.  When the escrow holder has mutually agreeable written instructuons and funds adequate to comply with those instructions, the escrow is closed. The escrow account is an independent depository wherin all funds, instructions, and documents for the sale of a home are held, including the buyer's down payment, lender's funds, documents for the new loan, hazard and title insurance, inspeciton reports, and the seller's grant deed.  At the close of escrow, the escrow holder delivers these items to the appropriate parties, disburses the funds, and processes the associated paperwork. The escrow is opened shortly after the purchase agreement has been fully executed by both buyer and seller.  It cannot be successfully completed until all escrow instructions have been complied with and all parties have signed escrow documents.  The length of escrow can range from a few days to several months, depending on the terms of the purchase agreement. Opening the escrow One of the REALTORS involved in the transaction will open the escrow, supplying the escrow officer with all information needed to proceed. Once the purchase agreement has been executed, the buyer's agent will deliver the initital deposit (earnest money) to escrow.  The Loan Process With the exception of an "all cash" transaction, a buyer will need to obtain a loan or loans to purchase a home. By the time escrow is opened, the buyer (should) have already begun the loan process by either being "pre-qualified", which involves little more than an interview with a lender, or "pre-approved" , which is much more attractive to a seller, and involves filling out the loan application, completing a credit check, and providing the lender with the required income and debt documentation.  Then the only items needed for a full loan approval are a satisfactory title report and appraisal.  All parties will be kept informed of the progress by the buyer's agent. Unless the seller owns the property free and clear, there will be a loan or loans to be paid off on the seller's behalf.  It is important for the seller to continue to make payments so as not to damage his/her credit.  Completing the information about these existing loans is also important so the escrow officer can order the loan payoff demands. Signing Escrow Instructions and Loan Documents Each party has a set of escrow instructions to sign, the seller must have the grant deed notarized, and the buyer will sign the loan documents.  The REALTORS will arrange times with their respective clients and with escrow to complete these tasks. Once all contingencies have been removed and the loan is approved, the loan documents are sent to the escrow officer.  After the buyer has signed loan documents, the escrow officer will give them to the lender for a final review.  The review usually occurs within a few days, after which the lender advises the escrow officer that they areready to fund the loan.  If all conditions of the escrow have been satisfied, the escrow officer will inform you of the date the escrow will close and will take care of the technical and financial details. Close of Escrow Close of escrow signifies legal transfer of title and ovvurs when the grant deed is filed with the county recorder.  The escrow officer will prepare a final settlement statement and dispurse funds as indicated.