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.
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.
Happens in Escrow
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.
is Escrow and Why is it Needed?
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.
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
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.
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.
Happens at Closing?
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.
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,
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.
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.
Chooses the Escrow and When?
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.
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.
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.
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.
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.
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
to Hold Title
8 Ways to hold title on real property
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
(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
(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.
(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
(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
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.
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.
Escrow Corporation vs. Other Escrow Providers
not license the escrow department
or 4 years E.O. +
by the D.O.C.
without any prior
go out by
audits at employer's discretion.
$5,000,000 Escrow Agents Fidelity
Corp. (E.A.F.C) covers all Licensed
to any individual who is a member
of the California Escrow Association
Impartial as a Third Party
is an employee of broker, who has influence
over the transaction
has access/control of
Unless financing is
provided by the bank.
Unless financing is provided by the
S & L
of Justice Investigations of all employees,
including photos and fingerprints