About Escrow

Feeling confused about what an Escrow is? Why you should look into selecting an Escrow Company for your real estate transactions? Below we have compiled a few frequently asked questions about escrow that may help you find your answers.

What is an Escrow?

An escrow is an arrangement in which an impartial third party, known as the Escrow Holder, holds legal documents and funds on behalf of a Buyer and Seller, and distributes them according to the Buyer's and Seller's instructions.

This escrow process was developed in order to help facilitate the sale or purchase of property. It achieves this by performing the following duties:

  • Acting as the impartial third party, or depository of documents and funds.
  • Processing and coordinating the flow of documents and funds.
  • Keeping all parties informed of progress on the escrow.
  • Responding to the Lender's requirements.
  • Securing a title insurance policy.
  • Obtaining approvals of reports and documents from the parties as required.
  • Prorating and adjusting insurance, taxes, rents, etc.
  • Recording the deed and loan documents.
  • Maintaining security and accountability of monies owed and owing.

What is an Escrow Holder?

An Escrow Holder is a person who holds the papers and/or money during an escrow transaction. Individuals whom do this as a career are known as Escrow Officers.

There are several reasons for selecting an established independent Escrow Company, or Officer, as your Escrow Holder. One is that real estate transactions require a tremendous amount of technical experience and knowledge to handle the process smoothly. The other is that the Escrow Holder will generally be responsible for safeguarding and properly distributing the purchase price funds, so it's in one's best interests to use a professional service for their escrow needs.

Escrow officers with Jade Escrow are highly experienced and trained in real estate procedures, such as title insurance, taxes, deeds, and insurance.

Who are the different parties involved in an Escrow and what do they do?

The Seller
The Seller is the individual selling a piece of property. A few of their duties are:

  • Deposits the executed deed to the Buyer with the Escrow Holder.
  • Deposits evidence of pest inspection and any required repair work.
  • Deposits other required documents such as tax receipts, address of mortgage holders, insurance policies, equipment warranties or home warranty contacts, etc.

The Buyer
The Buyer is the individual buying a piece of property. A few of their duties are:

  • Deposits the funds required, in addition to any borrowed funds, to pay the purchase price with the Escrow Holder.
  • Deposits funds sufficient for home and title insurance.
  • Arranges for any borrowed funds to be delivered to the Escrow Holder.
  • Deposits any deed of trust or mortgages necessary to secure loans.
  • Approves any Inspection Reports, the Preliminary Report for title insurance, etc. called for by the purchase and sale agreements.
  • Fulfills any other conditions specified in the escrow instructions.

The Escrow Holder
The Escrow Holder is the individual managing the transaction and funds involved in the escrow process between the Buyer and the Seller. A few of their duties are:

  • Opens the order for title insurance.
  • Obtains approvals from the Buyer on the Preliminary Report, pest and other inspections.
  • Receives funds from the Buyer and/or any Lender.
  • Prorates insurance, taxes, rents, etc.
  • Disburses funds for title insurance, recording fees, real estate commissions, lien clearance, etc.
  • Prepares a final statement for each party, indicating amounts to be disbursed for services and any further amounts necessary to close escrow.
  • Records deed and loan documents, loan documents to the Lender and funds to the Seller, closing the escrow.

What are escrow instructions?

Escrow instructions are written documents, signed by the parties giving them, which direct the escrow officer in the specific steps to be completed so the escrow can be closed. Typical instructions would include:

  • The method by which the Escrow Holder is to receive and hold the purchase price funds to be paid by the Buyer.
  • The conditions under which a lapse of time or breach of purchase contract provision will terminate the escrow without a closing.
  • The instruction and authorization to the Escrow Holder to disburse funds for recording fees, title insurance policy, real estate commissions, and any other closing costs incurred through escrow.
  • Instructions as to the proration of taxes.
  • Instructions to the Escrow Holder on the payment of prior liens and charges against the property and distribution of the net sale proceeds.
Since the Escrow Holder can only follow the instructions as stated, and may not exceed them, it is extremely important that the instructions be stated clearly and be complete in all details.

How long does an escrow take to close?

The length of time it takes for an escrow to close can vary greatly. Once all the terms and conditions of the instructions of both parties have been fulfilled, and all closing conditions satisfied, the escrow is closed and the safe and accurate transfer of property and money has been accomplished.

To see an example of a 30-day escrow, please see the related link in our resources section below.

What are some other resources I can reference to help the escrow process?

Below are a few links to some additional resources that you can use to help your understanding of the escrow process, and make your own process go quickly and smoothly.