FAQ

What is an escrow?
Escrow is a depository for funds, a deed or other instrument by one party for delivery to another party upon completion of a condition or event. Legal definition can be found in the California Escrow Law, Section 17003 of the Financial Code.

Why do I need an escrow?
Whether you are the buyer or the seller, you want assurance that no funds or property will change hands until all of the instructions have been followed. With the increasing complexity of business, law and tax structures, it takes a trained professional to supervise the transaction.

When choosing an independent Department of Corporations (DOC) licensed escrow company, you are getting a company whoe is 100% neutral that must adhere to the most stringent standards in the industry and whose sole business is providing escrow services.

Who Chooses The Escrow Company?

The selection of the Escrow Holder is typically done by and between the principals. In the event there is a realtor/broker involved in the transaction, they may make a recommendatioin to the principals. Remember, only independent escrow companies, licensed by the DOC, are required to adhere to laws prohibitting the payment of referral fees, thus affording the principals to choose the best possible escrow services, without compromise.

Escrow…How Does It Work?

The Principals to the escrow, - Buyer, Seller, Lender, Borrower – cause the escrow instructions and miscellaneous escrow documents to be prepared and will sign and complete all items as necessary to complete their escrow as per the terms of their agreement, respectively. In the event there is a realtor/broker involved, they will typically provide all needed information to prepare all documents needed. The Escrow Holder will process the escrow file as called for therein and when all actions, conditions, reports etc. have been completed and deemed satisfied, and when all funds are in place, Escrow Holder will then authorize the closing of the escrow.

It takes a trained, experienced professional to process an escrow file. The duties of an Escrow Holder include, but are not limited to: following instruction of the principals in a timely manner, handling and safeguarding information, funds and documents, disbursing funds as instructed, providing a full accounting of same to the principals, obtaining an disbursing various documents and reports and keeping all parties updated and informed of the escrow status.

WHAT DO I DO WHILE IN ESCROW?
The key to any transaction is reading and understanding documents placed before you, such as contracts and instructions and reports. If you need explanation of documents requiring your signature, contact your escrow officer. They should be able to answer your questions or direct you to an appropriate party. Keep in mind that your Escrow Holder cannot give advice in any way, but rather acts upon instruction from the principals. Quick responses to correspondances, both written and verbal, will assist in a timely closing.

In the event you are required to provide funds to the Escrow Holder, please be sure you are aware of the type of funds acceptable. While all must follow the "good funds law", company procedures and policies may vary. Communication is the key to a successful, ontime closing. When in doubt, ask. As a Buyer, in the event you are obtaining a new loan, it is your responsibility to arrange for same. Escrow Holder will obtain the lender's contact information from you and will work with your lender direct as appropriate for purposes of the file. You will also need to arrange for your fire/hazard insurance and decide how you will hold title to your new property.

As a Seller, you will need to have available pertinent information about the property, such as existing mortgages that will need to be paid off and homeowners association documents and/or information, if/as applicable. You may also need to arrange for various inspections that are typically handled through your realtor.

 

If I still have questions about the transaction, where can I go for answers?
In the event the transaction has been negotiated through a realtor/broker, they should be your primary consultant.

The role as an independent agent prohibits the escrow officer from answering your questions, if you are looking for advice. However, a knowledgeable escrow officer, whose responsibility is giving impartial service to all the parties, will refer you to the proper source for all your answers. An escrow officer may often suggest you seek the advice of legal counsel or a tax consultant.

The escrow instructions are ready, what is the next step?
When the escrow instructions have been prepared, read them carefully to determine that they are complete and properly reflect your total agreement. If you have any questions or corrections, discuss them with the escrow holder before signing. Once the instructions have been signed, they become the basis for the conduct of the escrow.

If I still have questions about the transaction, where can I go for answers?
If negotiations have been conducted through a real estate agent, the agent or his/her broker, should be your primary consultant.
The role as an independent agent prohibits the escrow officer from answering many of your questions. However, a knowledgeable escrow officer, whose responsibility is giving impartial service to all the parties, will refer you to the proper source for all your answers. An escrow officer will often suggest that the customer seek the advice of legal counsel or a tax consultant.

What happens at closing?
When instructions of all parties to the escrow have been carried out, the closing can take place. All outstanding funds are collected at this time and the costs must be paid. Title to the property, whether real or personal, will then be transferred. All specified documents are recorded or filed at this time.

What fees must I pay at closing?

Fees and charges are controlled by many factors and depend largely upon the type and complexity of the transaction and the terms of the agreement. However, there are certain charges which are considered to be normal and customary. These would include such fees as charged by a lender in connection with obtaining a new loan or in paying off an old one. They may also include county recording fees, title insurance policy premiums, documentary transfer taxes, prepaid taxes and insurance and escrow fees. All charges are negotiated and stipulated within a contract and reiterated in your escrow instructions. Escrow Holder will only pay for costs and fees as instructed by the principals. Your escrow officer will provide you with an itemized statement of all charges.

What happens at closing?
When instructions of all parties to the escrow have been carried out, and all required funds are in, the closing can take place. Escrow is considered closed when the deed transferring title and/or the deed of trust encumbering the property is recorded with the County Recorder and made of public record. At this time, the Escrow Holder will obtain and confirm any and all final figures as submitted to escrow for payment and create the Final Closing Statement(s) and /or HUD(s). These statements are an accounting which sets forth all the debits and credits incurred on behalf of a principal, each having their own statement. In the event there is a specific need at the close of escrow, for example, funds to be wired to you or another escrow be sure to communicate this detail with your escrow officer early in the process. When receiving your final closing package, it is important to go through and review all the documentation provided as there could quite possibly be a refund check in the package. Please be sure to cash that check quickly and that it is property endorsed when doing so. While some company policies may vary, final closing statements and packages are typically sent out within 24-48 hours of closing/recording. The Escrow Holder will retain a copy of your complete escrow file for 5 years. However, you may possible be required to retain a copy of your final closing paperwork for longer than that as appropriate by federal, state and / or local laws.

The closing is complete, now what?
Any recorded documents to which you are entitled will be mailed to you after the escrow has closed. Frequently, these documents will come to you directly from the office of the recorder or the Secretary of State in case of personal property filing. As a Buyer, you will receive insurance policies several days after closing. As a seller, please be sure to cancel any automatic payments in connection with the property.

 

If the transaction is canceled, is my deposit refundable?
No escrow is opened with the intent to cancel it. However, there are occasions when this is unavoidable. When a transaction fails to close, a cancellation agreement must be reached between the principals. This cancellation agreement must be in the form of a written instruction generated by Escrow Holder or a Cancellation of Contract generated by the realtor/broker. However, the latter must meet Escrow Holder's requirements. Since the deposit is part of the escrow contract, all principals must mutually agree to its disposition. Instructions of this deposit should include provisions for payment of charges incurred during the escrow.

NOTE: The only way escrow can legally cancel an escrow is by mutual instruction by the principals to the escrow or by a court order. In the event there is no communication to Escrow Holder, the Escrow Holders general provisions may address this scenario in more detail.

 

What about Title Insurance?
The issuance of title insurance and payment of same is negotiated through your purchase contract with your realtor. Escrow Holder works closely with the title company, instructing the title company of the type of policy(ies) required for your particular transaction. Typically, the Seller will cause the Buyer to be provided a policy of title insurance, an Owners Policy, that insures the Buyer is clear owner to unencumbered property, or only encumbered by a loan Buyer authorized. The Buyer will cause their Lender be provided a policy of title insurance, insuring the lender that they are in First Lien position on the property. While policies, coverage and payment may vary, the above is an example only of a typical scenario.

 

What about Property Taxes?
It is customary for taxes to be current at the close of escrow. Regardless if they are due and being paid through the closing or not, they will always be pro-rated so that the principals will only pay for the property taxes for the time frame they onwed the home respectively. If applicable, the same concept is applied to homeowners association dues as well.

 

Does the Perfect Escrow Exist?
Perfection is sometimes difficult to achieve, especially when dealing with the complexities fo the escrow process, the desires of all parties involved and other matters, all of which are often out of the control of the Escrow Holder. It is human nature to err on occasion, however, choosing an independent escrow company, such as Banker Direct Escrow, Inc., your escrow officer will have the background, training, education, support and systems in place, that are necessary to accomplish the objectives and intent of all parties involved.

There are several different regulatory agencies governing escrow operations in California. Banker Direct Escrow, Inc. is governed by the Department of Corporations, wherein escrow law is upheld, assuring principals their transactuib is handled with the utmost care and consideration.