Whether you are an experienced real estate listing agent, you just got your license or you’re selling your home, this information is a great reminder or valuable basic knowledge for your first transaction.
Welcome to Escrow 101
“Hey, our home is in escrow!” You often hear this from a homeowner with excitement which means they are one step closer to closing on their home. Home buying and selling isn’t simply wiring money from one account to another. It’s a process and the terminology can be a bit much to know and understand. To make it easy for you to understand we created this workflow of the process. We also included some terminology and definition in the process. But first…
What is an Escrow?
An escrow is a financial agreement where a third party (escrow company) holds and regulates the funds from the buyer and seller in order to complete the transaction. The funds are recorded and secured in an escrow account. Why need an escrow account and not simply transfer money to purchase a house? Since the house is considered an asset and a very large significant asset, contracts are created to assure everything is in place. It’s a long process and we’ll go over that a little later. We talk about the 805Escrow process on our website. Below is an example of our process.
- The Harper family (Buyer) makes an offer on a two story house in an ideal family friendly neighborhood. Their real estate agents, SG Associates, tells the Carter family (Seller) and their realtor, XRE about the offer and accepts it.
- SG Associates call 805Escrow (escrow agent) about their client accepted offer on a house.
- 805Escrow starts the process by opening an escrow account. Here the buyer and seller sign an acceptable purchase agreement. 805Escrow will collect the funds (earnest money deposit) from the buyer to put into the escrow account.
- Research Title is performed to assure there are no discrepancies and issues with the ownership of the property. This is performed by many parties and once it is done a Title Commitment is issued.
- 805Escrow also creates all of the documents involved in the closing process. Also many parties review and audits the documents to satisfy their own internal controls.
- Request Payoff Information. 805Escrow will obtain the payment information the seller has on the property. Information consists of the mortgage company, HOA, water, sewer trash, etc.
- Set Signing Appointments. 805Escrow will schedule when the notary will be available for the documents to be signed. They will also let you know the amount of funds you will need to bring for the transaction, or how much you will receive from the sale.
- Review All Documents. 805Escrow will verify that all terms of the contract have been met, send the executed documents back to the lender, and request the funds from the lender to complete the transaction.
- Record the Transaction. Once 805Escrow receives all of the funds, they will send the appropriate signed documents to the County Recorder to transfer the ownership of the property. Once confirmed they will disburse funds to all parties to the transaction per the contract. This could include the following: mortgage payoffs, lien payoffs, commissions, reimbursements, etc.
- Record the Transaction. Once 805Escrow receives all of the funds, they will send the appropriate signed documents to the County Recorder to transfer the ownership of the property. Once confirmed they will disburse funds to all parties to the transaction per the contract. This could include the following: mortgage payoffs, lien payoffs, commissions, reimbursements, etc.
We hope this helps you and your clients in understanding the process. At 805Escrow, we know it’s a heavy and stressful process for the buyer and seller as well as all parties representing them. As agents, being knowledgeable and informing your clients is key to making the home buying experience an easy one. Leave a comment or call us for any questions regarding the escrow process. Have a great day!