Congratulations! You’ve negotiated an agreed upon sales price on a perfect piece of Big Bear real estate. So now what happens? It’s time to open escrow. Very simply defined, an escrow is a deposit of funds, a deed or other instrument by one party for the delivery to another party upon completion of a particular condition or event.
In California, escrow companies are regulated by the Department of Corporations or the Department of Real Estate and must undergo constant scrutiny. They are required to hold funds in bank accounts fully protected by law or have bonds that ensure customers are protected during escrow process or in the event the escrow holder cannot honor its financial obligations.
Escrow opens when the buyer and seller sign a sales contract, commonly called a real estate purchase agreement. The contract, along with any additional instructions and the buyer’s deposit, is delivered to the escrow officer and he or she will prepare escrow instructions to be signed by the buyer and seller.
Escrow includes depositing funds, documents, and instructions necessary to complete the transfer of title. An escrow period can range from a few days to several months, depending on the terms of the deal and each party’s ability to perform. Escrow assures that the lender releases the home purchase funds and the deed is recorded to acknowledge new ownership. When the buyer’s loan is funded, all additional conditions have been met, and the deed is recorded, the escrow is considered “closed”.
Because the real estate transaction involves large sums of money and detailed documentation, escrow isn’t always a predestined, step-by-step process, and can become a confusing end game of details and overlapping procedures. It requires preparation, attention to detail, and desire from both sides to close the deal.
In The Escrow Process – Part 2, we will discuss buyer and seller responsibilities during the escrow process and a few tips for a smooth transaction.
More About the Escrow Process;
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- Escrow – Definition and Description – Chuck on HubPages – Escrow is a legal arrangement whereby a neutral third party, called the escrow agent, holds an asset during the period in which the deal is being finalized by the …
- The Devil is in the Details when Closing Escrow – Time to explore the fruits of your labors after purchasing your new home. Now that you’re getting close to calling this house a home at last, let’s look at how the …