ESCROW SURVIVAL GUIDE -For Homebuyers in Northeast Los Angeles - PART ONE: What is Escrow?
Many eastern states use a settlement/closing process to effect a purchase of real estate. California and several other western states use a process known as "escrow".
It's bad enough that the word "escrow" itself can be used is so many different ways.
"Escrow" can be a verb: As in "We will escrow the money".
"Escrow" can be a company name: As in "Arroyo Village Escrow".
"Escrow" can be a generic noun, a word for the process itself: "We are in escrow".
And "escrow" as a process is not limited to real estate transactions. You can escrow items you buy and sell on eBay. eBay's one approved escrow service provider is escrow.com.
Escrow.com describes the eBay escrow process this way (I am paraphrasing here):
1. Buyer and Seller agree to terms
2. Buyer submits money to escrow.com
3. Escrow.com confirms receipt of money
4. Seller ships item
5. Buyer confirms receipt of item
6. Escrow.com forwards the money to the seller.
Substitute the idea of shipping the item with the idea of recording the transfer deed, add a few layers of complexity, a few additional steps, and a few zeros to the price of the item, and you will understand the process as it applies to a real estate transaction.
An escrow company is a neutral third party. Buyers and sellers deposit documents and money with this neutral third party. The neutral third party holds the money and the documents, until whatever conditions agreed upon by both buyer and seller are met, then the third party distributes the documents and the money.
In a California real estate transaction, the neutral third party (the escrow company) has some requirements to of their own to complete before the transaction can close.
So while the buyer is busy obtaining inspections and completing paperwork for final loan approval, and while the seller is busy making agreed upon repairs and making moving arrangements, the escrow company will:
1, Receive buyer's initial deposit and prepare escrow instructions. Obtain all signatures.
2, Order a title search and receive the preliminary title report.
3. Distribute copies of the preliminary title report to all parties and obtain approval.
4. Request "demands" (that is, pay-off statements) from the seller's existing lenders.
5. Obtain seller's signature on grant deed. Hold grant deed until all terms are meet, and all money is deposited.
6. Calculate prorations on property taxes, rents, insurance, or other expenses as required.
7. Coordinate with buyer's lender. Order and process buyer's loan documents.
8. Receive buyer's down payment funds and request funds from buyer's lender.
9. Order recording of grant deed to buyer and distribute all funds: Pay-off existing loans; pay required costs, such as termite completion; release net proceeds to seller.
Don't worry! If you are working with one of the experienced real estate agents at Bob Taylor Properties, Inc., in Highland Park, we will constantly monitor your escrow to make sure that all participants are performing their tasks correctly and on time; so that your escrow proceeds smoothly and closes successfully.