- Posted by Jordan Blakley
At some point a long, long time ago buyers and sellers decided they needed a method to help facilitate transactions and voilà, the escrow account was born!
What is an Escrow Account?
According to the California Escrow Law, an escrow account is a deposit of funds, a deed or other instrument by one party for the delivery to another party upon completion of a specific condition or event. Simply put - it is separate account which protects the interests of all the real estate transaction parties. It houses all monies, instructions and paperwork necessary for the impending real estate sale, including funds for the down payment and the deed to the home.
Why Is an Escrow Account Important?
An escrow account provides both the seller and buyer with one, simple guarantee: no funds or property will be transferred until every escrow term and condition has been met.
How Does the Escrow Process Work?
The buyer, seller, and lender draft the terms of the escrow agreement. This document is then signed by all parties and is sent to the escrow agent. It is here that the escrow agent will process the funds and documents, in accordance with the escrow instructions. It is important to note that typically, the buyer will instruct the escrow officer to release funds only when title insurance has been issued and the seller's deed has been signed. Remember, escrow is not complete until all the terms have been fully satisfied and all the parties have signed the appropriate documentation.
How Do I Open an Escrow Account?
Generally, the buyer's or seller's real estate agent will open the escrow account. In fact, after completing the Purchase Agreement, the real estate agent will put the initial deposit in escrow.
What Happens after I've Signed the Closing Escrow Papers?
After both parties have signed all the necessary instructions and documents, the escrow officer will return the buyer's loan paperwork to the lender for final inspection. Once this step is complete, the lender will then grant permission to fund the buyer's mortgage.
What is an Escrow Closing?
An escrow closing marks an end point in the real estate sale process. It represents the legal transfer of title from the seller to the buyer. All documents and funds have been collected and properly disbursed, meaning you – the buyer – now own your home (subject to the mortgage, of course)!