An Independent Escrow Company Serving the South Bay Since 1991.
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    ESCROW FAQ  

Escrow is a service that provides a means of security in the handling of important funds and documents. The California Escrow Law, Section 17003 of the Financial Code, provides the legal definition of escrow. An escrow holder works with the Buyers, Sellers, Lenders and Borrowers ("the principals") involved in a transaction to assure funds and documents change hands at the appropriate point in time, after preset conditions have been met.

After the principals agree upon an escrow holder, the group must provide the holder with a set of written instructions, mutually agreed upon by all parties. The escrow holder then holds onto all important documents and funds until the written conditions are met for dispersal of these items. When all contingencies of the escrow instructions have been met or achieved, the escrow will be closed.

What Happens in Escrow?
What is Escrow and Why is it Needed?
How Does Escrow Work?
Your New Loan
What Happens at Closing?
Closing Costs
What About Cancellation?
Who Chooses the Escrow and When?
What Do I Do in Escrow?
  The Seller
  The Buyer
  The New Lender
  The Escrow Holder
Common ways to hold a title
Why Choose Us?

What Happens in Escrow          TOP

This information is an overview and is designed to acquaint you with the escrow process. The information is based on relatively simple escrows. Every escrow is unique and most are more complex and require a tremendous amount of technical experience and knowledge to insure smooth processing and closing. Our goal at Palm West Escrow is to provide you with unsurpassed escrow services necessary to complete your transaction. If you should have any questions about the escrow process, we suggest that you contact your escrow officer, real estate broker or attorney to obtain further explanation or advice.

What is Escrow and Why is it Needed?          TOP

Escrow is a service which provides the public with a means of protection in the handling of funds and documents. Buyers, Sellers, Lenders and Borrowers ("the principals") can conduct business with each other and minimize their risk by using a neutral party, the "Escrow Holder." The California Escrow Law, Section 17003 of the Financial Code, provides the legal definition of escrow.

In escrow, the principals give their mutual written instructions to the escrow holder, whose duty is to assure that no funds or documents will change hands until all requirements shown in the instructions have been followed. The escrow holder has the obligation to safeguard the funds and/or documents while they are in the possession of the escrow holder, and to disburse funds and/or convey title only when all requirements of the escrow have been completed.

How Does Escrow Work?         TOP

The principals to the escrow (buyer, seller, lender or borrower) or the real estate agents, if any, will provide the escrow officer with the information necessary for the escrow officer to prepare ' 'escrow instructions.' The escrow instructions will tell the escrow officer what specific requirements ('contingencies') are to be completed so that the escrow can be closed. After the principals have carefully reviewed the instructions to be sure they reflect their total agreement between each other, they are to be signed by the principals. Upon mutual execution of the instructions the escrow holder will process the escrow in accordance with the instructions. When all contingencies of the escrow instructions have been met or achieved, the escrow will be "closed." Every escrow follows this basic pattern but will vary considerably due to the different contingencies of your specific transaction.

Since the escrow holder can only follow the instructions as stated, and may not exceed them, it is extremely important that the instructions be stated clearly and be complete in all details.

Your New Loan         TOP

It has become a practice of many lenders to forward their loan documents to the escrow office for you to sign. You should be aware that these papers are the lender's documents and you may need to contact your lender to explain or interpret them. You have the option of requesting a representative from the lender's office to be present while signing loan documents, or arrange to meet with your lender to sign the documents in their office.

What Happens at Closing?         TOP

Once all the terms and contingencies of the instructions of all principals have been fulfilled, and all closing conditions satisfied (including the deposit of all outstanding funds required to close), the escrow officer authorizes the title company to record all documents and to issue their policy of title insurance. When the title company confirms with the escrow officer that the County Recorder has recorded all documents, the escrow is deemed "closed." There are many aspects to the closing of the escrow, and some of these cannot be processed immediately. Upon Escrow Holder's receipt of closing information from the title company, the Escrow Holder will prepare final closing statements and closing packages. If you have special needs, please let your escrow officer know prior to close of escrow.

Title insurance policies and fire insurance policies may take several days to be delivered. Any recorded documents to which you are entitled will be mailed to you directly from the County Recorder's office. The original deed of trust (if applicable) is mailed to the lender — not to the Buyer/Borrower.

Closing Costs         TOP

The costs incurred in any escrow transaction are controlled by many factors and depend upon the type of transaction and conditions involved. Many fees are considered customary while others are charged based on your particular transaction. The escrow company has no control over the costs charged by other services such as title insurance, recording fees, lender's charges, etc.

The escrow fee is normally based on the size, complexity, liability assumed and the cost of producing the service. It may be necessary to charge additional fees for extra or unusual services performed during the course of your escrow. Upon request, your escrow officer will be able to provide you with an estimate of our costs as well as those costs charged by others, provided such information is available.

A final closing statement will be prepared after the close of escrow and will give you an itemization of all charges and credits to your account. The statement will reflect the purchase price, credits and debits to your account, payoff of existing loans, the cost for all services and the amount of the funds you are entitled to at closing. When you receive this statement, please review it carefully. If a check is enclosed with it, please cash it promptly to avoid delays and costs in replacing stale dated or misplaced checks. If you have any questions regarding your closing statement or check, please call your escrow officer for an explanation.

YOUR CLOSING STATEMENT AND ALL OTHER ESCROW PAPERS SHOULD BE KEPT IN A SAFE PLACE AND VIRTUALLY FOREVER FOR INCOME TAX PURPOSES. Your accountant will need certain information for income tax purposes. Escrow files are usually destroyed after five years, so it is important not to depend upon us to keep your records. If copies are required, a nominal fee may be charged for retrieving closed files from storage.

What About Cancellation?         TOP

No escrow is opened with the intention of canceling, but there are occasions when a transaction fails to close due to contingencies that cannot be met or when the principals disagree during the course of the escrow. Cancellation of an escrow is provided for in our Additional Escrow Conditions and Instructions.

Instructions for cancellation of the escrow and distribution of any funds deposited in escrow must be given to the escrow holder in writing. As with any other instruction, these instructions must be mutually agreed to by the principals. The escrow holder will take the position that no funds on deposit can be refunded until the escrow holder is in receipt of the MUTUALLY executed cancellation instructions. Without these instructions the escrow holder cannot make a determination as to who is the "rightful" party and therefore cannot return the funds or documents.

Sometimes, when a dispute exists, the escrow holder may be forced to allow a court to decide which party is entitled to certain documents or funds; this is called an Interpleader Action. Fortunately, most disputes are resolved before this action is taken, as the costs for such legal actions are extreme and are usually paid out of the funds on deposit in escrow.

Who Chooses the Escrow and When?         TOP

The selection of the escrow holder is normally made by agreement between the principals. If a real estate agent is involved in the transaction, the agent may recommend an escrow holder. However, it is the right of the principals to use an escrow holder who is competent and who is experienced in handling the type of escrow at hand. There are laws that prohibit the payment of referral fees; this affords the consumer the best possible escrow services without any compromise caused by a person receiving a referral fee.

When you and the other party or parties have made all necessary decisions and are in agreement to the terms of your transaction, a mutually selected escrow company should be contacted.

What Do I Do in Escrow?         TOP

The key to any transaction as important as your sale, purchase or loan, is to READ and understand your escrow instructions. If you do not understand them, you should ask your escrow officer to explain them. Your escrow officer is not an attorney or an accountant and is prohibited from giving any legal, tax or investment advice. However, your escrow officer, whose responsibility is to give impartial service to all of the principals, will refer you to the proper source for answers to any questions that your escrow officer cannot answer. Your escrow officer may suggest you seek the advice of your real estate agent, legal counsel or tax consultant. In order to expedite the closing of escrow, responding quickly to correspondence will assist in the timely closing of your transaction.

If you are required to deliver funds into escrow, make sure that you provide "good funds" in the form of a cashier's check or wire transfer. Do not give the escrow officer a personal check as the escrow can only close on cleared funds and the processing of a personal check can take several days, possibly even a week or more.

THE SELLER:         TOP

Signs and deposits escrow instructions and other necessary documents such as Grant Deed, tax information forms, Statement of Identity form, address(es) and account number(s) of mortgage holder(s), termite inspection reports, funds, if needed, etc.; and fulfills any other conditions specified in the escrow instructions.

THE BUYER:         TOP

Signs and deposits escrow instructions and other necessary documents such as funds required to close, Statement of Identity form, signed loan documents, approval of reports, etc.;

Promptly provides the escrow holder or real estate agent with the EXACT MANNER in which you would like to appear on title, (correct spelling of name(s), marital status, etc.);

Provides name and information of the new lender and fire insurance agent. (Please contact your insurance agent as soon as possible to choose the type of insurance plan you want. Escrow will contact your insurance agent prior to close of escrow.);

Arranges for lender's funds to be delivered to escrow or title company;

Fulfills any other conditions specified in the escrow instructions.

THE NEW LENDER:         TOP

Communicates with the Borrower and obtains necessary information and documents from Borrower to provide financing in a timely manner and deposits proceeds of new loan with escrow holder or title company.

THE ESCROW HOLDER:         TOP

Acts as the impartial "stakeholder," or depository of documents and funds; processes and coordinates the flow of documents and funds; prepares escrow instructions and follows them in a timely manner; requests a preliminary "title" search to determine the present condition of title to the property; obtains approval of reports and documents from the principals as instructed; receives funds from buyer, seller, borrower and/or lender, as applicable; requests lien holder statements for debts to be paid in full at closing or to be assumed by Buyer; secures releases of all contingencies or other conditions as imposed on any particular escrow; responds and complies with lender's requirements, as specified in the escrow instructions; and prepares or secures the deed or other documents relating to the escrow and as specified in the escrow instructions.

When all contingencies in the escrow instructions have been met, authorizes title company to record documents with the County Recorder's office and requests that the title company issue their policy of title insurance.

Upon confirmation that documents have been recorded, disburses funds for payment of charges, fees, taxes, prorations, insurances, rents, commissions, lien clearance, loan fees, proceeds to Buyer and Seller, etc. and prepares a final statement for each principal, accounting for the disposition of all funds deposited in escrow.

Common Ways to Hold Title

8 Ways to hold title on real property in California

Title to real property in California may be held by individuals, either in Sole Ownership or in Co-Ownership. Co-Ownership of real property occurs when title is held by two or more persons. There are several variations as to how title may be held in each type of ownership. The following brief summaries reference eight of the more common examples of Sole Ownership and Co-Ownership.

(1) Sole Ownership
A Single Man/Woman. A man or woman who is not legally married. Example: John Doe, a single man.

(2) An Unmarried Man/Woman
A man or woman, who having been married is legally divorced. Example: Joe Doe, an unmarried man.

(3) A Married Man/Woman, As His/ Her Sole And Separate Property
When a married man or woman wishes to acquire title in his or her name alone, the spouse must consent, by quitclaim deed or otherwise, to transfer thereby relinquishing all right, title and interest in the property. Example: John Doe, a married man, as his sole and separate property.

CO-OWNERSHIP

(4) Community Property
The California Civil Code defines community property acquired by husband and wife, or by either. Real property conveyed to a married man or woman is presumed to be community property, unless otherwise stated. Under community property, both spouses have the right to dispose of one half of the community property. If a spouse does not exercise his/her right to dispose of one-half to someone other than his/her spouse, then the one-half will go to the surviving spouse without administration. If a spouse exercises his/her right to dispose of one-half, that half is subject to administration in the estate. Example: John Doe & Mary Doe, husband and wife, as community property. Example: John Doe & Mary Doe, husband and wife. Example: John Doe, a married man.

(5) Joint Tenancy
Joint tenancy estate is defined in the Civil Code as follows :"A joint interest is one owned by two or more persons in equal shares, by a title created by a single will or transfer, when expressly declared in the will or transfer to be a joint tenancy." A chief characteristic of joint tenancy property is the right of survivorship. When a joint tenant dies, title to the property immediately vests in the surviving joint tenant(s). As a consequence, joint tenancy property is not subject to disposition by will. Example: John Doe and Mary Doe, husband and wife, as joint tenants.

(6) Tenancy In Common
Under tenancy in common, the co-owners own undivided interests; but unlike joint tenancy, these interests need not be equal in quantity or duration, and may arise at different times. There is no right of survivorship; each tenant owns an interest which, on his or her death, vests in his or her heirs or devisees. Example: John Doe, a single man, as to an undivided 3/4ths interest, and George Smith, a single man, as to an undivided l/4th interest' as tenants in common.

(7) Trust
Title to real property in California may be held in a title holding trust. The trust holds legal and equitable title to the real estate. The trustee holds title for the trustor/beneficiary who retains all of the management rights and responsibilities.

(8) Community Property With Right Of Survivorship
Community Property of a husband and wife, when expressly declared in the transfer document to be community property with the right of survivorship, and which may be accepted in writing on the face of the document by a statement signed or initialed by the grantees, shall, upon the death of one of the spouses, pass to the survivor, without administration, subject to the same procedures as property held in joint tenancy.

Important Notice: The preceding summaries are a few of the more common ways to take title to real property in California and are provided for informational purposes only. For a more comprehensive understanding of the legal and tax consequences, appropriate consultation is recommended. There are significant tax and legal consequences on how you hold title. We strongly suggest contacting an attorney and/or CPA for specific advice on how you should actually vest your title.

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Why Choose Us?

Licensed Escrow Corporation vs. Other Escrow Providers
  Independent
Escrow
Companies

Real Estate
Broker-Owned
Escrow
Departments
Title Company
Escrow
Departments
Bank
Escrow
Departments
Savings &
Loan
Escrow
Departments
State Regulator Department of
Corporations
Will not license the escrow department
Bonding Required YES No No No No
Manager Escrow
Experience Requirements
5 years E.O.
Experience
or 4 years E.O. +
Escrow School
No No No No
Regulator Audits YES
(Every 12 Months
by the D.O.C.
without any prior
notice)
NO
D.R.E. Auditors
go out by
appointment
only.
Internal audits at employer's discretion.
Annual CPA Audit
Required
YES No No No No
Trust Funds Insured

YES
$5,000,000 Escrow Agents Fidelity Corp. (E.A.F.C) covers all Licensed Escrow Corporations

YES

D.R.E.
Recovery Fund:
max $20,000
per individual

No No No
Escrow Officer
Certification
Available to any individual who is a member
of the California Escrow Association
Financial Liquidity
Requirements
YES No No No No
Escrow License
Required
YES No No No No
Assumed Impartial as a Third Party
YES NO
Escrow Officer
is an employee of broker, who has influence over the transaction
Title Department
has access/control of
escrow money
and procedures
YES
Unless financing is
provided by the bank.
YES
Unless financing is provided by the S & L
Dept. of Justice Investigations of all employees, including photos and fingerprints
YES No No No No

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