When does escrow typically open and how does it work?

A common question from consumers is “When does escrow typically open and how does it work?”  The answer to that question varies, depending on the type of transaction, but the below guide can be used as an overview for the usual process.

 

In the typical escrow, the principals to the real estate transaction that requires an escrow (borrower, lender, buyer and/or seller) cause escrow instructions to be created, signed, and delivered to the escrow officer. In the case of a real estate sale/purchase, escrow usually opens when a fully executed purchase agreement has been delivered to an escrow holder. The good faith deposit or initial down payment may or may not be deposited at the same time. The delivery of the signed purchase agreement and/or accompanying deposit to an escrow company is usually facilitated by the listing or selling broker involved. Upon receipt of a fully executed purchase contract and/or good faith deposit, the escrow officer will normally assign the transaction an escrow number.  When calling your escrow officer with questions or concerns, it is helpful to have this escrow number handy because this will allow the escrow officer to locate your file more easily.

 

The applicable broker will typically provide the escrow officer with important information regarding the transaction, such as the names and contact information for the principals, lending and title information, selection of service providers, and other necessary details.  After escrow opens, the escrow officer will order a real property title search with the title company designated by the parties, if this has not already been done by the listing broker, and prepare escrow instructions. These instructions are normally pre-approved by the brokers involved in the transaction. Once they are deemed to be error free and finalized, the instructions are sent to the parties for signature. These instructions essentially tell the escrow officer what to do and when to do it, and basically give the escrow officer the authority to act. It is worth pointing out that there are some aspects of a real estate transaction that are not part of the escrow. For instance, the purchase agreement contains several items that are not handled by escrow holders, such as buyer and seller agreements regarding property fixtures, personal property, removal of contingencies, liquidated damages, arbitration and mediation. It is important to remember that if you have specific questions about the purchase agreement, you should contact your licensed real estate broker or licensed attorney.

 

Basically, the escrow officer can only process the escrow in accordance with the escrow instructions. Therefore, without signed instructions, the escrow officer cannot act or proceed. The escrow officer will then perform those functions that they were authorized to do in writing by the mutual agreement of the parties to a transaction, unless an instruction(s) is unlawful and/or against the policy of the escrow holder. The required conditions, processing, and facilitation of the escrow may differ depending on the type of transaction and property involved. However, regardless of the type of escrow being performed, it is only when all of the conditions required in the escrow instructions have been satisfied that the escrow will be complete. At the close of escrow, the escrow officer will release funds and documents in accordance with the escrow instructions, pay all bills as authorized, and prepare and deliver a final closing statement to the parties.

 

Escrow Tips for Buyers

Most first-time home buyers, and some returning home buyers are not familiar with the escrow process when buying a home. At first, the process may seem confusing and frustrating to home buyers. So, we have created an easy-to-understand  buyers escrow checklist that covers many of the documents that you will encounter during a typical closing scenario.

In order to ensure a successful escrow process without any delays, the following documents must be reviewed, completed, signed and returned to your escrow officer. Failure to complete and return the following items in a timely manner could result in a delay in closing your escrow on time.

• Escrow instructions
• Confidential Statement of Information
• Request for insurance information
• Preliminary change of ownership
• Vesting worksheet
• Any other miscellaneous documents that your Escrow Officer has specified

Escrow Instructions : The key to any transaction is to read and understand your escrow instructions. If you do not understand them, you should ask your escrow officer to explain the instructions. Also, please review your escrow instructions to ensure accuracy.

Confidential Statement of Information: In order to expedite the completion of your transaction and ensure the successful transfer of title, the title company requesting that you complete the “Statement of Information” form. If any item on this form does not pertain to you, please indicate by entering 'N/A' (Not Applicable).

Request for insurance information: Your new lender will require proof of hazard insurance before funding your loan if insurance has not already been set up as an impound. Please select an insurance agent or company and provide the contact information to your Escrow Officer as soon as possible.

Preliminary change of ownership: This form must be completed by the buyer prior to a transfer of the subject property and filed with each conveyance in the County Recorder's office for the county where the property is located. Please answer all questions in each section, and sign the certificate before sending it to your Escrow Officer. This information is used by the Tax Assessors Office to determine the tax basis for the property.  Please note that there are penalties assessed by the county for failure to complete this form.

Vesting worksheet: After you have determine the manner in which you wish to hold title, please complete, sign and return this form to your Escrow Officer. Your new lender will need this information before your loan documents are drawn.

Any other miscellaneous documents that your Escrow Officer has specified : In special circumstance, your Escrow Officer will inform you if additional documentation is needed. Please be sure to return all documents as quickly as possible to your Escrow Officer so that your escrow closes smoothly.

Little Known Valuation Tool for Listing a Home

It is apparent that homes are selling faster in California than they were a year ago, and even faster than they were two years ago.  As a result of low inventory, the California Association of Realtors has concluded, "homes are moving off the market faster in January, with the median number of days it takes to sell a single-family home decreasing to 36.6 days in January, down from 38.1 days in December and down from 59.6 days for the same period a year ago."

Nevertheless, even in a seller's housing market, it is imperative to have a house priced to sell. One little-known research tool that can be useful for sellers  to find information to price their home to the best of their knowledge is the Los Angeles County Office of the Assessor Property Assessment Information System (maps.assessor.lacounty.gov). There you can find up-to-date information on recent sale information, roll values, property boundary description, building description, and when applicable, recent parcel change activity.

Furthermore, the Assessor's user-friendly website provides the assessed land value and improvement value of the home, which can be helpful to ascertain a more accurate valuation of the property. However, be aware that properties that have not been on the market for a significant amount of time will have a lower assessment value. Use information from the PropertyAssessment information system in conjunction with other tools at your disposal to determine property value.

Whether we are in a seller's market or a buyer's market, the houses that are priced to sell at a fair market value will always be the houses that make it to escrow the quickest.