What is escrow?
Escrow is a deposit of funds, a deed or other instrument by one party for the delivery to another party upon completion of a particular condition or event. The escrow law is California Escrow Law, Section 17003, which provides the complete legal requirements for our type of business.
Why do I need escrow?
Whether you are a buyer, seller, lender or borrower, you want assurance that no funds or property will change hands until all of the instructions in the transaction have been followed. The escrow holder has the obligation to safeguard the funds and/or documents while they are in the possession of the escrow holder, and to disburse funds, and/or convey title only when all provisions of the escrow have been complied with.
How does it work?
The principals to escrow—buyer, seller, lender, borrower—cause written escrow instruction to be created, signed and delivered to the escrow officer. If a broker is involved, he or she will normally provide the escrow officer with the information necessary for the preparation of your escrow instruction and other documents.
The escrow officer will create escrow instruction and process the escrow, in accordance with the escrow instruction. When all conditions required in the escrow can or have been met or achieved, the escrow will be “closed.” Each escrow, although following a similar pattern, will be different in some aspects, as it deals with your property and the transaction at hand.
The duties of an escrow holder include following instruction given by the principals and parties to the transaction in a timely manner, handling the funds and/or documents in accordance with the instructions, paying all bills as authorized, responding to the authorized requests from the principals, closing the escrow only when all terms and conditions have been met, distributing the funds in accordance with the instructions and providing an accounting for the same—the Closing or Settlement Statement.
How do I choose escrow?
The selection of the escrow holder is normally done by agreement between the principals. If a real estate broker is involved in the transaction, the broker may recommend an escrow holder. However, it is the right of the principals to use an escrow holder who is competent and who is experienced in handling the type of escrow at hand. There are laws that prohibit the payment of referral fees; this affords the consumer the best possible escrow services without any compromise caused by a person receiving a referral fee.