What is Escrow?

Escrow is a trusted neutral third party. They have the job of a trustworthy entity that communicates with the seller and the buyer equally. They keep the buyer's and seller's investment safe till the transfer of ownership. Once the buyer and seller sign an agreement, one of the realtors will hire an escrow and title company. A unique number is assigned by the company to every transaction. This is called "open escrow". This unique number is used as a reference to this specific property, buyer, seller, lender, bank, brokers, agents, etc. The buyer will use it to wire the initial deposit (earnest money) and the down payment to the escrow account.

In a way, escrow is like the accountant in a property sale. They keep the buyer's initial deposit in a safe account called the "escrow account". Then they will either hand to the seller along with the lender's funds after the sale is final or return to the buyer if the sale is canceled. Because the escrow company takes orders from buyer and seller or their agents, they try to stay transparent to all parties. They will provide answers whenever they are asked as long as they have the information requested.

Property Reports

Escrow and Title companies also order required property reports, such as Natural Hazardous Report, Title Insurance Policy, and Preliminary Title Report, which they review in order to provide the buyer with a clear title for the property they are purchasing. They also prepare final settlements to buyer and seller. The final settlement document shows how much each party has in credit and debt by the closing date. In addition, they prepare all documents for signature and recording and they coordinate all appointments. If the seller or buyer cannot sign in person, escrow assigns a notary public to carry the closing documents to that party and collect all signatures.

Escrow Fees

For all their services, they charge about 1% to 2% of the home purchase price. Buyer and seller decide who pays escrow fees and may agree to pay it either by the seller, the buyer, or split between both according to the purchase agreement. In general, Southern California companies charge more than Northern California companies. Some companies charge base fees even if the transaction is canceled.

 Escrow Facts

Other free services provided by escrow are pre-transaction services, such as buyer's and seller's net sheet, neighborhood mapping of homes, and mapping of owner occupancy and tenant occupancy.

Most likely, realtors pick their favorite escrow company to work with. They are familiar with their staff, work habits, and have established a way to reach them at all times. Sellers and buyers would not mind which one to work with and they cannot tell the difference.

Sellers and buyers who use the 1031 exchange program would prefer to stay with the same escrow company that handled their first transaction. (This is only for 1031 exchange customers. All others can skip this statement). Call or email for a free consultation.