The real estate escrow holder can be any third party acts as neutral (some states requires certain escrow holders should be licensed). There are basically two key reasons for selecting an established, S&L or title company, an attorney, or an escrow officer with a bank, independent escrow firm. The first one is, the real estate transactions need a tremendous amount of knowledge and technical experience to handle smoothly. Second one is that the escrow holder is generally responsible for properly distribute the purchase price and safeguarding. The escrow officers with established firms are normally experienced and trained in the real estate procedures, insurance, deeds, and title insurance.
- Escrow instructions: The escrow instructions are written documents. These are signed by the parties giving them, and direct the escrow officer in specific steps to be completed the process, so the escrow can be closed. It will typically include the following:
- The method of escrow holder to receive and hold purchase price to be paid by the purchaser.
- Conditions under the lapse of time or purchase contract provision breach will terminate escrow without closing.
- Authorization and instruction to escrow holder to disburse or pay out funds for recording fees, real estate commissions, title insurance policy, and other closing costs subjected through escrow.
- Instructions as to the closings of taxes and insurance.
- Instruction to escrow holder on payment of prior charges and liens against property and distribution of net sale proceeds.
- Escrow process – the seller role: The seller role in the escrow process is as follows:
- With the escrow holder, deposits the executed deed to buyer.
- Deposits the evidence of the pest inspection and any required of repair work.
- Deposits other required documents such as warranties or home warranty contracts, insurance policies, addresses of mortgage holders, tax receipts, etc.
- Escrow process – the buyer role: The buyer role in the escrow process is as follows:
- Deposits funds required, in addition to any borrowed funds, to pay purchase price with the escrow holder.
- Deposits funds sufficient for title insurance and home.
- Arranges for borrowed funds to be delivered to escrow holder.
- Deposits deed of trust or mortgages necessary to secure the loans.
- As per the purchase and sale agreements, approves title insurance commitments, inspection reports, etc.
- Fulfills other conditions specified in the escrow instructions.
- Escrow process – the lender role: The lender needs to deposit proceeds of the loan to purchaser and directs escrow holder on conditions under which the loan funds may be used.
- Escrow process – the holder role:
- Opens order for title insurance.
- Obtain approvals from buyer on pest, title insurance report, and other inspections.
- Receive funds from buyer or/and lender.
- Prorates rents, taxes, insurance etc.
- Disburse funds for lien clearance, real estate commissions, recordation fees, title insurance, etc.
- Prepare final statement for each party, which indicate amounts to be payed for services and further amounts necessary to close the escrow.
- Record deed and loan documents, deliver deed to buyer, loan documents to lender and funds to seller, closing escrow.
Once all terms and conditions of both parties are fulfilled, and all closing conditions are satisfied, escrow is closed. Safe and accurate transfer of money and property has been accomplished.