What is an Escrow?

Buyers and sellers of a property establish terms and conditions for the transfer of ownership of the property

These terms and conditions are given to a third party known as the escrow holder. In turn, the escrow holder has the responsibility of seeing that terms of the escrow are carried out. The escrow is an independent neutral account and the vehicle by which the mutual instructions of all parties to the transaction are complied with.

The escrow is a depository for all monies, instructions and documents necessary for the purchase of your home, including your funds for down payment and your lender’s funds and documents for the new loan. Generally, the buyer deposits a down payment with the escrow holder and the seller deposits the deed and any other necessary documents with the escrow holder. Prior to the close of escrow the buyer deposits the balance of the funds required and agreed upon by the parties with the escrow holder.

The buyer instructs the escrow holder to deliver the monies to the seller when the escrow holder forwards the deed to the title company for recording and is notified by the title company that a policy of title insurance can be issued showing title to the property is vested in the name of the buyer.

The escrow holder thus acts for both parties and protects the interests of each within the authority of the escrow instructions. Escrow cannot be completed until the terms and conditions of the instructions have been satisfied and all parties have signed escrow documents. The escrow holder takes instructions based on the terms of the purchase agreement and the lender’s requirements.

How Does the Escrow Process Work?

How Do I Open an Escrow?

As soon as you execute your purchase, I will open escrow for you and the escrow company will generate the joint escrow instructions for your review, approval and execution. Then, I will place your initial deposit into the official escrow account. Your purchase agreement/joint escrow instructions represent your written statement to the escrow holder. Escrow will also require that title insurance be provided for the protection of your new home.

How Will I Know Where My Money Has Gone?

Written evidence of your deposit is generally included in your copy of the purchase agreement/joint escrow instructions. Your funds will then be deposited in a separate escrow or trust account and processed through a local bank.

Who Pays What in a Typical Escrow?

The Seller Can Generally be Expected to Pay For:

  • Title insurance premium-owners policy
  • Real estate commission
  • Documentary transfer tax (e.g. $1.10 p/$1,000 of sales price-may vary by area/state)
  • Any city transfer/conveyance tax (recording tax)
  • Payoff of all loans in seller’s name (or existing loan balance if being assumed by buyer)
  • Interest accrued to lender being paid off
  • Statement fees
  • Reconveyance fees and any prepayment penalties
  • Termite work (according to contract)
  • Home warranty (according to contract)
  • Seller’s portion of escrow fee
  • Any judgments, tax liens, etc. against seller
  • Tax proration (for any taxes unpaid at the time of title transfer)
  • Any unpaid homeowner’s dues (can be paid by either buyer or seller)
  • Recording charges to clear all documents of record against seller
  • Any bonds or assessments (according to contract)

The Buyer Can Generally be Expected to Pay For:

  • Title insurance premium-for lender’s coverage
  • Termite inspection – according to contract (can be paid for by either buyer or seller)
  • Buyers portion of escrow fee
  • Notary fees
  • Homeowner’s transfer fee (usually about $175)
  • Inspection fees (roofing; property inspection, Geological etc. – usually about $300)
  • Home warranty (according to contract)
  • City transfer/conveyance tax (according to contract)
  • Fire insurance premium for first year