Friday, December 14, 2007

Escrow...what is it?

The actual definition of escrow as found in the glossary of terms in the Cornerstone Title Company website is: An independent third party, such as First American Title, who acts as the agent for buyer and seller, or for borrower and lender, carrying out instructions of both and disbursing documents and funds. Escrow closes and the transfer of property or document is completed upon fulfillment of certain conditions specified in the written instructions, whereupon the necessary deeds and other instruments are recorded.


To explain it step by step might clear it up a bit.

Step 1: Open Escrow

Once an offer has been accepted on a property, the buyers agent will open an account at the escrow company of the buyer's choice. It differs from county to county, but in San Francisco the buyer pays the escrow fees and is therefore entitled to choose the company. The buyer then places their initial deposit for the property into the escrow account at which time a preliminary title report is ordered.

Step 2: Contingency Period

Once the buyer's loan has been processed and they have satisfied themselves with inspections and appraisal of the property, the buyers will remove their contingencies and wait for the final loan documents to arrive at the escrow company.

Step 3: Signing

When the loan documents are ready, they are sent to the escrow company where they are prepared to be signed by the buyer. After preparing the documents, your escrow officer will send you a final closing statement which itemizes the closing costs and gives you an estimated total of funds due before closing. This total will include the remainder of your down payment along with your lender's fees, escrow fees, and title insurance.

Step 4: Recording

The seller will have a separate set of documents to sign such as authorizing their loan to be paid off and the seller's net sheet which itemizes their costs and profits from the sale. Once everyone has signed their documents and the remainder of the buyer's funds including closing costs and down payment have been deposited, the lender can fund the loan and the escrow company can record the new deed with the city marking the actual close of escrow. Escrow is closed once the deed has been recorded.

A typical escrow period in San Francisco is thirty days. This length of time needs to be agreed upon between the buyer and seller, as do all other terms involved in the transaction. It is our job as Realtors to walk you through this process; finding the right property is only the beginning. Then the real fun begins!

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