 
An escrow is an arrangement whereby a disinterested third party,
called an escrow holder, holds funds and legal documents on behalf
of a buyer and seller. The escrow holder distributes the funds and
legal documents when all terms of the transaction have been met according
to the buyer's and seller's instructions.
People buying and selling
real estate often open an escrow for their protection and convenience.
The buyer can instruct the escrow holder
to disburse the purchase price only upon the satisfaction of certain
prerequisites and conditions. The seller can instruct the escrow
holder to retain possession of the deed to the buyer until the
seller's requirements, including receipt of the purchase price,
are met. Both
rely on the escrow holder to carry out faithfully their mutually
consistent instructions relating to the transaction and to advise
them if any of their instructions are not mutually consistent or
cannot be carried out.
An escrow is convenient for the buyer and
seller because both can move forward separately but simultaneously
in providing inspections,
reports, loan commitments and funds, deeds, and many other items,
using the escrow holder as the central depositing point. If the
instructions from all parties to an escrow are clearly drafted,
fully detailed
and mutually consistent, the escrow holder can take many actions
on their behalf without further consultation. This saves much
time and facilitates the closing of the transaction.
The parties
in an escrow (buyer, seller, lender, and escrow holder) have
differing responsibilities. Each must fulfill their obligations
according to the escrow instructions before the escrow officer
can conclude the escrow and distribute funds and legal documents.
The
responsibilities of each party include:
The Buyer
The buyer's escrow process obligations are to:
Deposit the funds required, in addition to any borrowed funds,
to pay the purchase price with the escrow holder.
- Deposit funds sufficient for home and title insurance with
the escrow holder.
- Arrange for any borrowed funds to be delivered to the escrow
holder.
- Deposit any deed of trust or mortgage necessary to secure loans.
- Approve any inspection report and title insurance commitments
called for by the purchase and sale agreement.
- Fulfill any other conditions specified in the escrow instructions.
The Seller
The seller's escrow process obligations are to:
- Deposit the executed deed to the buyer with the escrow holder.
- Deposit evidence of pest inspection and any required repair
work.
- Deposit other required documents such as tax receipts, addresses
of mortgage holders, insurance policies, equipment warranties,
home warranties, etc.
The Lender (if applicable)
The lender's escrow process obligations are to:
- Deposit proceeds of the loan to the purchaser with the escrow
holder.
- Direct the escrow holder on the conditions under which the
loan funds may be used.
The Escrow Holder
The escrow holder's escrow process obligations are to:
- Open the order for title insurance.
- Keep the parties informed of the progress.
- Obtain approvals from the buyer on the title insurance report,
pest inspection, and any other inspections called for in the
purchase agreement.
- Receive funds from the buyer and/or any lender.
- Prorate insurance, taxes, rents, etc.
- Disburse funds for title insurance, recording fees, real estate
commissions, lien clearance, etc.
- Prepare a final statement for each party indicating amounts
to be disbursed for services and any further amounts necessary
to close the escrow.
- Record the deed and loan documents and deliver the deed to
the buyer, loan documents to the lender, and funds to the seller,
thereby closing the escrow.
The escrow process was developed to help you facilitate the sale
or purchase of your home. The escrow holder accomplishes this by:
- Acting as an impartial "stake holder".
- Processing and coordinating the flow of documents and funds.
- Responding to the lender's demands.
- Securing a title insurance policy.
- Obtaining approvals of reports and documents from parties to
the transaction as required.
- Prorating and adjusting any fire insurance, taxes, rents, or
other such items.
- Recording the deed and any loan documents.
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This is general
information. To determine the proper choice for your
particular situation you must consult with your attorney, legal
advisor and/or financial advisor(s).
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PARTIES
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| Any number of persons. |
Any number of persons
(can be husband & wife.).
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Only husband and wife. |
Only husband and wife. |
DIVISION
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Ownerships can be divided into any number
of interests equal or unequal.
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Ownership interests must be equal. |
Ownership & managerial interests are equal. |
Ownership and managerial
interest are equal, except control of business is solely with
managing spouse. |
TITLE
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Each co-owner has a separate legal title
to his undivided interest.
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There is only one title to the whole property.
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Title is in the "community". |
Title is in the "community". |
POSSESSION
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Equal right of possession.
(only unity of interest required)
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Equal right of possession. |
Equal right of possession, with similar absolute
power of disposition. |
Both co-owners have equal
management and control with similar absolute power of disposition. |
CONVEYANCE
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Each co-owner's interest may be conveyed
separately by its owner.
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Conveyance by one co-owner without the others
breaks the joint tenancy. |
Separate interest cannot be conveyed without
the written consent of the other spouse. |
Separate interest
cannot be conveyed without consent of spouse. Upon death, survivor
can convey full title with proper affidavit. |
PURCHASER'S
STATUS
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Purchaser will become a tenant in common
with the other co-owners in the property.
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Purchaser will become a tenant in common with
the other co-owners in the property. |
Purchaser can only acquire whole title of community:
cannot acquire a part of it. |
Purchaser can only acquire
whole title of community: cannot acquire a part of it. |
DEATH
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On co-owner's death, his interest passes
by will to his devisees or heirs. No survivorship right.
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Upon the death of one tenant, title passes to
the surviving joint tenants. Joint tenancy cannot be disposed
and does not pass to heirs. |
On co-owner's death 1/2 belongs to survivor
in severalty 1/2 goes by will to descendant's devisees or by
succession to survivor. |
On co-owner's death 1/2
belongs to survivor in severalty 1/2 goes by will to descendant's
devisees or by succession to survivor. |
CREDITOR'S
RIGHTS
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Co-owner's interest may be sold on execution
sale to satisfy his creditor. Creditor becomes a tenant in
common with remaining co-tenants.
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Mortgage, deed
or lien against one tenant does not sever joint tenancy, or
right of tenancy unless property
is sold by foreclosure prior to death of party who incurred
lien. |
Community property is general liable for a debt
incurred by either spouse Co-owners interest cannot be seized
and sold separately. Unless through foreclosure proceedings. |
Community property is
general liable for a debt incurred by either spouse Co-owners
interest cannot be seized and sold separately. Unless through
foreclosure proceedings. |
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Services
Overview