What is Escrow?
In a real estate transaction, an escrow is simply a deposit of funds from a buyer, for delivery to a seller, upon completion of specific conditions set forth in a contract.
In fact, in California, our Residential Purchase Agreement is also called “Joint Escrow Instructions”. These instructions are unique to your agreement, and are precisely what the Escrow Officer at the designated Escrow company will follow.
Why an Escrow?
All parties to a real estate transaction benefit from the safeguard of an escrow, whether you are a buyer, seller or a lender. The escrow holder has a duty to keep the funds safe and to only dispurse these funds when all the parties have complied with the terms of the Residential Purchase Agreement (Joint Escrow Instructions).
The buyer and seller may choose and agree upon a reputable and bonded Escrow company to ensure a comfort level by all parties.
How does an escrow Work?
To keep it simple: the buyer makes an offer (usually through a real estate agent/ broker) on a Residential Purchase Agreement form. The seller receives the offer and either accepts it, rejects it, or counters the offer. Once there has been a “meeting of the minds” and the terms of the purchase are set forth and agreed upon, the real estate agent/broker will normally provide the escrow officer with the contracts, which contain all the information necessary for the preparation of your escrow instructions and documents.
The Escrow holder will then follow the instructions in a timely manner; handling the funds, paying all bills, and responding to any authorized requests or amendments to the original instructions.
Once all the required conditions per the contract have been met, any designated loans will be funded, the Title to the property shall be transferred from the seller to the buyer, and the escrow will be “closed” or complete.