Understanding the Escrow Process

Buying or selling a home involves the transfer of significant funds, important documents, and legal ownership of property. To protect the buyer, seller, and lender, these items must be handled securely, accurately, and impartially. That is the purpose of escrow.

Escrow is a neutral process in which money, documents, and other items of value are delivered to an independent third party known as the escrow holder. The escrow holder safeguards these items and releases them only after the parties’ written instructions and all required conditions have been satisfied.

Simply stated, the escrow holder ensures that no funds or property change hands until everyone has fulfilled their agreed-upon responsibilities.

The Escrow Holder’s Role

The escrow holder follows the written instructions provided by the principals to the transaction. This includes:

• Receiving and safeguarding funds and documents

• Preparing or obtaining required escrow documents

• Coordinating with buyers, sellers, lenders, real estate agents, and title representatives

• Verifying that all conditions and contingencies have been satisfied

• Disbursing funds and delivering documents to the appropriate parties

• Providing a final accounting of all funds deposited and disbursed through escrow

To complete the transaction, the escrow holder may require loan documents, tax information, insurance policies, title reports, payoff demands, financing terms, and invoices for services to be paid through escrow.

If the transaction requires new financing, the buyer is responsible for applying and qualifying for the loan. The lender’s loan documents and funding requirements must be received and satisfied before the transaction can close.

Closing the Escrow

Escrow is ready to close once all written instructions have been fulfilled, required documents have been signed, funds have been received, and all conditions have been satisfied.

At closing:

• Final funds and fees are collected

• Authorized payments and loan payoffs are disbursed

• Transfer documents are submitted for recording

• Ownership of the property is transferred

• The appropriate title insurance policy is issued

• Final closing statements are provided to the parties

Funds required for closing must be delivered in a form acceptable to the escrow holder. Wire transfers are commonly required because personal and out-of-town checks may delay closing.

The Escrow Holder

• Serves as a neutral third party and communication link among the parties

• Prepares escrow instructions and related documents

• Requests a preliminary title report to determine the current condition of title

• Requests payoff demands or beneficiary statements when necessary

• Follows applicable lender instructions and funding requirements

• Receives and safeguards the buyer’s funds

• Prepares or obtains deeds and other documents required for closing

• Prorates taxes, interest, insurance, rents, and other charges according to instructions

• Obtains required releases of contingencies and conditions

• Closes escrow after all written instructions have been satisfied

• Disburses funds for authorized charges, including recording fees, commissions, title insurance, and loan payoffs

• Provides final settlement statements accounting for all funds received and disbursed

The Escrow Holder Does Not

• Provide legal or investment advice

• Negotiate the terms of the transaction

• Make decisions on behalf of the buyer, seller, or lender

• Favor or represent one party over another

At Seabreeze Escrow Group, our role is to provide a neutral, knowledgeable, and dependable escrow experience while helping every transaction move toward a successful closing.