Escrow – What
is it?
Very simply defined, an 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
California Escrow Law – Section 17003 of the Financial
Code – provides the legal definition.
Why Do I Need an
Escrow?
Whether you are the buyer, seller, lender
or borrower, you want the 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.
Escrow – How
Does it Work?
The principals to the escrow – buyer,
seller, lender, borrower – cause escrow instructions,
most usually in writing, to be created, signed and delivered
to the escrow officer. If a broker is involved, he will normally
provide the escrow officer with the information necessary
for the preparation of your escrow instructions and documents.
The escrow officer will process the escrow,
in accordance with the escrow instructions, and when all conditions
required in the escrow can be met or achieved, the escrow
will be "closed." Each escrow, although following
a similar pattern, will be different in some respects, as
it deals with your property and the transaction at hand.
The duties of an escrow holder include;
following the instructions given by the principals and parties
to the transaction in a timely manner; handling the funds
and/or documents in accordance with the instruction; paying
all bills as authorized; responding to authorized requests
from the principals; closing the escrow only when all terms
funds in accordance with instructions and provide an accounting
for same – the Closing or Settlement Statement.
Who Chooses the
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.
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