What Is Escrow And How Does It Work?

We understand that the escrow process can be complicated, but that’s why we’re here — to help make it as simple as possible.

In a new series we’ve decided to explain, in clear language, just what escrow is and how it works.

First: What is escrow?

Even the best deal on a new home still involves a whole lot of paperwork and a substantial amount of money being exchanged. To ensure that everything is completed at or near the date the deed is recorded to show new ownership, the necessary funds, documents, and instructions are placed with a neutral third party into an escrow account. The signed sales contract, along with other information, acts as a set of instructions for the escrow officer.

Escrow is a process, and since each home purchase is different, each escrow is unique. A depth of knowledge and experience keeps this process as smooth as possible.

Then, what do I need to open an escrow?

As we mentioned above, each escrow is unique, but every escrow needs certain paperwork. Below is an overview of the documents each escrow needs:

A Legible Contract
A faxed copy may not be legible, and an unsigned copy should accompany a signed contract.

A Fully Executed Contract
A faxed or email copy will suffice to get the process started BUT escrow is not allowed to release any documentation to anyone until a fully executed contract is received and the Buyer’s Initial Deposit is received.

Transaction Coordinator’s Contact Information

Commission Percentage
For Listing Agent and Selling Agent.

Buyer and Seller Information
Mailing address, phone number and/or email address.

Statement of Information
Seller(s) needs to provide within 7 days of acceptance.

Lender Contract
Lender name, phone number, email and mailing address (if possible).

Buyer’s Legal ID ( copy if possible)
To help confirm both the legal name and its spelling. Buyer(s) signature must match ID.

Vesting
Vesting of Buyer(s) is very important. This will help with sending out the Grant Deed with complete information. If Buyer(s) is purchasing a short sale, the name can’t change from the name on the contract.

Special Instructions
Whatever you would like escrow to do, for example: talk to your client, do not talk to your client, mail direct to them, do not mail to them, send everything to you, etc.

Other documents that could be required depend on a number of “IFs.” IF the home is in a trust, IF Seller(s) are now divorced, IF they were single when they purchased the property but are now married, IF the Buyer(s) will be married before the transaction closes, IF any of the parties are deceased, IF Buyer(s) and/or Seller(s) are in a LLC or Partnership. In addition to these “IFs” there are many other possible “IFs,” and your Escrow Officer will be able to help you sort out what you’ll need.

NEXT PAGE: Red Flags

You know what escrow is, and your escrow officer has helped get all the paperwork together to open an escrow. But now is the time to keep an eye out for “red flags.” An explanation of what red flags are on the next page.

Pages: 1 2 3 4 5 6