Frequently Asked Questions

An escrow is an arrangement in which a neutral and impartial third part, called an escrow holder, holds legal documents and funds on behalf of a buyer and seller, and distributes them 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 perquisites and conditions. The seller can instruct the escrow holder to retain possession of the deed to the buyers 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 time and facilitates the closing of the transaction.

The escrow process was developed to help facilitate the sale or purchase real estate. The escrow holder accomplishes this by:

  • Acting as the impartial “stake-holder”, or depository of documents and funds
  • Processing and coordinating the flow of documents and funds
  • Keep all parties informed of progress on the escrow
  • Responding to the lender’s requirements
  • Securing a title insurance policy
  • Obtaining approvals of reports and documents from the parties as required
  • Prorating and adjusting insurance, taxes, rents, etc.
  • Recording the deed and loan documents
  • Maintaining security and accountability of monies owed and owing
Preparing to Work with Your New Lender
As you begin the home buying process, one of your important first steps is to take a serious look at your finances. This means putting your “financial house” in order and pre-qualifying for your new financing before you ever make a formal application for a new loan.

There are several factors which demonstrate your credit worthiness and your ability to repay your loan, including your income, savings, debts, and credit history. Consider the following actions you might take to provide evidence to your lender that you are a good risk.

  • Your Income – Your lender will verify your income to be sure you can manage your new loan payments. If you anticipate receiving a pay increase in the near future, ask your employer to verify this. Consider taking a position with your company that might offer you a higher salary, and if your spouse is unemployed, a job for that spouse might be worth considering as a way to enhance your monthly income.
  • Your Savings – Your lender may look at your savings account balance to see the amount of your cash-on-hand. Long-term, consistent savings demonstrates your spending discipline and an ability to produce sufficient down payment. Reduce expenses as much as possible and postpone making major purchases. Plan a budget and discipline yourself to stick to it.
  • Your Debts – Keep your credit as clean as possible and consult with your lender about consolidating credit card accounts. This takes time to appear on your credit report, so early attention to this detail is a good idea. Pay down existing loans if you can.
  • Your Credit History – Make all payments on time, fix any credit problems you may have, and do not overdraw your checking account.
    Once you choose a lender, be sure to provide that information to your Escrow Officer. As the escrow progresses, the Escrow Officer will be in contact with your lender to check on the approval process and to be sure that any required escrow documents are supplied promptly. When your loan is approved, your Escrow Officer will coordinate your document signing appointment and describe the timeline for the final steps leading to your closing. Your real estate agent, your lender, and your Escrow Officer will partner with you to guide you through the financing process from start to finish.
The final days before the closing of escrow are by far the busiest for the escrow officer and all other parties. At this point, all property disclosures have been delivered, any contingencies to the sale should have been satisfied, and the escrow officer has gathered most of the documents required to meet all closing requirements. Buyer and Seller may be making moving plans and the anticipation is mounting.

The announcement that the Buyer’s new loan has been approved is usually the “trigger” that puts the last steps into motion. Here is a brief description of the activities your escrow officer performs to prepare for The Big Day:

  • Order loan documents for the Buyer
  • Complete a full audit of the escrow file to make certain that all requirements are met
  • Prepare estimated closing statements for review by Seller and Buyer
  • Arrange for the loan documents to be signed
  • Forward all documents which must be recorded to the title insurance company
  • Order the Buyer’s insurance policy
  • Return signed loan documents to the lender
  • Complete final lender requirements
  • Receive final deposit of funds from the Buyer
  • Request loan funds from the lender
  • Advise the title company that it can proceed with recording

It is not uncommon for the escrow officer, lender, or title company to encounter one or two last-minute details which must be handled prior to closing. The Seller and Buyer can be of great help by making themselves available during this final week for clearing up these details and for signing any documents which might be needed. With moving plans underway and busy schedules, this isn’t always easy. Your escrow officer and real estate agent recognize this and will be working hard to minimize any inconvenience.

Keeping communication lines open will help ensure a smooth closing. General questions about the closing process are best directed to your escrow officer. If a Buyer has a question about his financing, he should contact his lender. Any issues relating to the property itself, including move-in dates or condition of the home, can be handled by your agent. A team of experienced real estate professionals and a cooperative Seller and Buyer are a winning combination as the transaction moves to its conclusion.

Escrow Documents Made Simple
In the early days following the opening of your escrow, you can expect to receive a package of documents and forms from your escrow officer. Here we provide a description of these documents and a simple explanation of what they mean.

While each escrow is unique, the opening document package for a typical sale escrow is likely to include:

Supplemental Escrow Instructions
The escrow company’s Supplemental Escrow Instructions are exactly what the name implies: they are additional instructions to the escrow holder. These extra instructions address matters which your escrow officer needs to manage during the escrow process even though they may not have been mentioned in your original purchase contract. Sometimes the Supplemental Escrow Instructions will re-state provisions in your contract which need clarification. The escrow company’s General Provisions are also contained in the Supplemental Escrow Instructions. Together, the Supplemental Escrow Instructions and your purchase contract state all the agreements between the seller and buyer and provide your mutual instructions to your escrow officer.

Statement of Information
Your title insurance company will make a thorough search of the public records along with its process of examining the title to the property. The information you provide on the Statement of Information will be used to clear judgments and liens which do not directly affect you or the property. This information is confidential and will be used only to help the title company complete its work.

Fire Insurance Information Form
If you are obtaining a new loan to purchase your property, your lender will require you to purchase fire insurance before your escrow closes. The information you supply on this form will tell your escrow officer which insurance agent you have chosen. Preliminary Change of Ownership Report This report is used by the county assessor to determine the tax basis for your property. California’s Revenue and Taxation Code requires that this document be filed with every transfer of title, but the information on the form is not recorded or made a part of any public record.

Vesting Worksheet
This worksheet instructs your escrow officer as to how you want to hold title to the property you are buying. It is a good idea to discuss your vesting with your tax advisor to be sure that your selection suits your financial and estate planning goals. The opening phase of your escrow will progress smoothly if you promptly return the documents sent to you. If you have questions about any item, call or email your escrow officer. He or she is well-acquainted with the documents and will be happy to explain them to you.

When meeting your escrow practitioner for the first time, there is pertinent information that the escrow practitioner requires to start an escrow transaction. Bringing the necessary documents to an escrow practitioner can aid in the preparation of the transaction, making the process pleasant and stress free.

The seller needs to provide:

Personal Information

  • Names of each spouse, if they are not listed on the title of the house
  • If there are multiple sellers but not all of them reside at the same address, their respective addresses are needed
  • Social security numbers, which are used to check on liens against the property
  • If taxes have recently been paid, a copy of the check of the date of payment
  • Personal contact information including the best time to reach all parties
  • Contact information for an alternate person that can be contacted in the event the main contact is unable to be reached (i.e. attorney, relative, etc.)

Home Information

  • Contact information of the current lender including name of the agent, address, phone number, fax number, email, and existing loan number
  • Any equity line of credit information

Miscellaneous

  • In case of a deceased joint tenant, a certified copy of the death certificate
  • Home Owners Association information, if applicable
The buyer needs to provide:

Personal Information

  • Personal contact information including the best time to reach all parties
  • Contact information for an alternate person that can be contacted in the event the main contact is unable to be reached (i.e. attorney, relative, etc.)

Lender & Title Information

    • Names as you wish them to appear on the title, if they are different from the contract
    • New lender contact information including name of the agent, address, phone number, email, and fax number
    • Proper identification such as driver’s license, passport, etc. in the name of how you are planning to take title. If no forms of identification

are available, the escrow practitioner must be informed immediately.

The escrow closing day is the conclusion of a process which, over days, weeks, or perhaps months, has required the cooperation and energy of many professionals and the Buyer and Seller. It is the final moment when the Escrow Officer, much like the “hub of a wheel”, ties together the various parts of the transaction and makes final arrangements for the transfer of title from Seller to Buyer.

Closing day unfolds like this for the Escrow Officer:

  • Just prior to closing, the Escrow Officer audits the entire escrow file, provides instructions to the Title Company, and formally authorizes recordable documents to be sent to the County Clerk’s office for recording. This can only be done after the Buyer’s loan funding has been confirmed and the Escrow Officer has received the buyer’s final deposit in clear funds.
  • On closing day, the Escrow Officer must wait for confirmation of the recording. Regional differences may affect this timing.
  • The officer will phone the Real Estate Agents to give them the good news, and the Buyer and Seller are usually notified by their agents. This is the phone call for which everyone has been waiting!
  • The Title Company finalizes its charges and computes any loan payoffs which must be made. These figures are then provided to the Escrow Officer sometime during the day of closing. The escrow file can not be fully balanced until every last figure is provided by the Title Company, checked for accuracy, and entered into the escrow.
  • Checks and final closing statements are prepared, usually by the end of the business day, but it is not uncommon for the final closing packages to be distributed on the day following the close of escrow. These packages contain the closing statement and other important paperwork which Seller and Buyer will want to retain for future tax purposes.
  • A Seller may provide wiring instructions to the Escrow Officer so that the sale proceeds can be wired directly into the Seller’s bank account.
  • This is a convenience for the Seller, because he receives immediate credit on his funds. Sometimes a Seller’s wire will be sent out on the day of closing, but this process may not be completed until the following morning. Any outgoing wire is subject to the Federal Reserve’s cut-off times and the rules which control the electronic transfer of funds.
  • Any checks which are issued must be personally endorsed by all payees named on the check and are subject to the check clearing policies of the bank where they are deposited.

Sellers and Buyers may expect the following post-closing activities:

  • If the circumstances of the escrow require that funds must be held after closing, these funds will be disbursed as soon as the requirements of that hold are satisfied.
  • The Buyer will receive a Policy of Title Insurance directly from the Title Company. This is an important document which should be saved.
  • The Buyer will receive the original recorded Grant Deed.
  • The Buyer may receive a Supplemental Property Tax Bill.
  • The Buyer is responsible for all property expenses as of the closing date. Contact the new lender and homeowner’s association if payment information is not received.
Lenders Title Policy
Title policy issued to lender to cover the amount of the loan. Based on the loan amount unless it is a negative amortization loan.

Document Transfer Tax
Fee charged on all properties that transfer title-based on sales price.

Electronic Recording
Charged to file for electronically recording documents.

Overnite Delivery
Charged to file for delivery of all time sensitive documents/monies.

Lenders Endorsement
Charged for endorsements required by lender to cover “outside the normal” risk circumstances.

Messenger Fee
Charged to file to “Special Messenger” documents during the course of escrow. Fee varies with distance.

Owners Title Policy
Fee to issue a title policy. Calculated using the sales price. May be reduced if home was purchased or refinanced in the last 5 years. Insures that the title is free and clear at the time of transfer.

Record Grant Deed
Charged to file for recording the Grant Deed.

Record Release/Reconveyance
Charged to file for recording release/reconveyance.

Record Trust Deed
Charged to file for recording Trust Deeds.

Sub-Escrow Fee
Fee to administer the pay-off of loans or property taxes of the seller and collection of funds from the new lender.

Title/Wire Fee
Charged to file for wiring funds to escrow, seller, lenders, etc.

Demand Fee
Charged for requesting a statement and processing involved in getting a pay-off figure to escrow on the outstanding amount of the current loan. One demand fee per loan.

Document Fee
Escrow covers the expense for drawing legal documents for official records.

Escrow Fee
Covers liability assumed as well as standard processing costs.

Process HOA Doc’s & Transfer Fee
Fee for processing required to assign membership for HOA and copying all governing documents.

One of the first critical steps after your escrow is opened is obtaining a complete package of Homeowners’ Association (HOA) documents for the Buyer’s review. The Purchase Agreement places this duty on the Seller; however it is customary for the escrow company to assist with this.

Typically, your escrow officer will request a package of documents from the association’s management company. These include the governing documents of the association such as the Bylaws and Covenants, Conditions, and Restrictions (CC&R’s) as well as important financial information and property transfer requirements which can affect both Buyer and Seller. A careful study of the CC&R’s is time well-spent for a Buyer. The covenants or agreements expressed in this document may have a significant effect on the buyer’s use and enjoyment of his property. The management company will also provide a statement which discloses the status of the seller’s account and the fees which must be paid to complete the transfer process.

As the Seller, you should be aware of the importance of obtaining association documents so that the Buyer’s time for review can begin.

As the Buyer, your duty is to review the documents and to indicate approval or disapproval within a specified time period. Complying with these dates not only keeps the escrow moving smoothly; it may prevent one of the parties from being in default under the terms of the real estate contract. Such a default might create a reason for one of the parties to request cancellation of the escrow.

Here are some guidelines which will help both parties meet their timelines and stay on track with their escrow process:

  • The Seller or his agent can help the escrow officer by providing complete and accurate HOA and management company information.
  • Be mindful of the time periods expressed in the Purchase Contract for Seller’s delivery of the documents to the Buyer and for Buyer’s approval of the package after receipt. Your real estate agent can assist you with this and explain the requirements of the contract.
  • The association or its management company will charge fees for the documents package. Even if the Seller thinks he has a set of the association’s documents, the Purchase Contract provides that the Seller will order a new document package from the association to be sure that it is complete and complies with current law. Some required documents, such as Minutes of recent association meetings, are not likely to be in the Seller’s possession.
  • The escrow officer will require your signatures and funds sufficient to pay the document fees. Whether the seller deposits funds for the document fees or arrangements are made to advance funds from the Buyer’s deposit, providing clear funds (such as a cashier’s check) for the deposit into escrow allows the escrow officer to order the documents immediately rather than waiting for a personal check to clear. This saves valuable time, especially if you are hoping for a rapid closing.
As a Seller in a transaction, you can expect to receive this document shortly after the escrow is opened. The information requested from you is not available from other sources, so your attention to this form is particularly important to your escrow officer.

The Property Information form has several sections, each of which serves a special purpose.

Existing Loan Information
Use this section to disclose all loans which you currently have on your property. Providing an accurate loan number is particularly important, as your escrow officer will need this information in order to obtain your loan payoff statement. The law requires your escrow company to have your written permission to obtain your loan payoff information. When you sign the statement, you are providing that authorization.

Credit Lines
If one of your loans in a line of credit, it is best to stop using the account during the escrow period so that an accurate payoff statement can be prepared by your lender. Your escrow officer may provide a copy of this form to your lender to request that your account be “frozen”. By placing your initials in this section, you indicate that you understand this process.

Property Reports
Many cities have ordinances which impose requirements on Sellers when they sell their property. These may include the disclosure of a home’s building permit history and satisfaction of water conservation and retrofit requirements. Because these laws vary widely throughout California, it is important to inform your escrow officer about any local laws which might affect the closing of your escrow.

Tenants and Leases
Advise your escrow officer if your property is rented to tenants. Your purchase contract may provide for a proration of the monthly rent and adjustments for security deposits. If so, your escrow officer can provide a Rent Statement which you can use to provide the required information.

Owner’s Associations
In this section of the form, you will tell your escrow officer about the homeowner associations which affect your property. During the escrow process, the associations will be contacted by your escrow officer for a statement of your account and property transfer requirements. If the fire insurance premium is included in your regular association dues, check the box provided for this purpose. This helps your escrow officer anticipate what will be needed to satisfy insurance requirements for the buyer in your transaction.

Seller’s Instructions to Escrow Holder
In the final paragraph of the Property Information Statement, you, as the Seller, instruct your escrow officer to order the necessary payoff statements and other documents which are needed to close your escrow. You also agree to pay the costs associated with these services. Sign the form, provide your social security number and, if possible, a forwarding address.

Escrow Documents Made Simple
Here is an explanation of the documents and forms which a Seller of residential property can expect to receive in his opening package. This package will be furnished by your escrow officer soon after your escrow is opened.

Supplemental Escrow Instructions
The escrow company’s Supplemental Escrow Instructions are exactly what the name implies: they are additional instructions to the escrow holder. These extra instructions address matters which your escrow officer needs to manage during the escrow process even though they may not have been mentioned in your original purchase contract. Sometimes the Supplemental Escrow Instructions will re-state provisions in your contract which need clarification. The escrow company’s General Provisions are also contained in the Supplemental Escrow Instructions. Together, the Supplemental Escrow Instructions and your purchase contract state all the agreements between the seller and buyer and provide your mutual instructions to your escrow officer.

Statement of Information
Your title insurance company will make a thorough search of the public records along with its process of examining the title to the property. The information you provide on the Statement of Information will be used to clear judgments and liens which do not directly affect you or the property. This information is confidential and will be used only to help the title company complete its work.

roperty Information Statement
Use this form to provide information about any existing loans you may have on your property and to identify your homeowner’s association for your escrow officer. Fully completing this statement will assist in the processing of your escrow.

Affidavit of Non-Foreign Status
Your signature on this affidavit certifies that you are a U. S. resident. Foreign persons, as defined by the Internal Revenue Service, are subject to federal tax withholding when they sell property. To learn more about how tax withholding may affect you, consult with your accountant, attorney, or the Internal Revenue Service. The website for the IRS is www.irs.gov.

1099-S Input Form
The information you supply on this form will be used by your escrow officer to produce IRS form 1099-S.

California Real Estate Withholding Forms 593-C and E
The State of California requires tax withholding for Sellers who do not meet residency requirements. Your answers to the questions on these forms will determine whether you are subject to withholding.

Grant Deed
This important document will transfer the title to your property to the Buyer on the day of closing. Be sure to sign it before a Notary Public and bring a current photo I.D. when you do so.

Special Documents
If the title to your property is not held in your name as an individual (such as in a trust or corporation) or there are unique conditions affecting your interest in the property, you may have some additional document requirements during the escrow process. Your escrow officer will advise you about these items.

The escrow closing is an important event in the lives of all the parties. But did you know that there are several post-closing activities which may need your attention? Check these lists for information which may concern you.

If you are a Seller, here are some items to consider:

  • Be sure to properly store the documents from your escrow transaction, especially the final closing statement. This document contains important information which you will need for preparation of your tax return.
  • If you carried a Purchase Money Note, you can expect to receive the original recorded Deed of Trust from the County Recorder. The original Note and the Deed of Trust should be retained in a safe place until the loan is paid in full.
  • Did your escrow require that funds be held after closing? These funds will be disbursed as soon as the requirements of that hold are satisfied. Contact your Escrow Officer if you do not receive a check in a timely manner.
  • If you paid off existing loans or other liens, you may receive documents which confirm these payments. Keep these in a safe place in case they are needed for future reference.

If you are a Buyer, here are some items to consider:

  • You will receive your Policy of Title Insurance by mail directly from the title insurance company. This important document gives you the assurance that your property is vested in your name and that it is free of any defects or liens (except those approved by you). Contact your Escrow Officer if you do not receive this document within 90 days following your closing date.
  • Retain your final closing statement in a secure place. You may need it for tax preparation purposes.
  • You will receive the original recorded Grant Deed by mail directly from the County Recorder.
  • If you obtained new financing, you should receive payment information from your Lender. Contact the lender if you do not receive any communication before your first payment is due.
  • If the Seller carried a Purchase Money Note, the Seller will provide you with a mailing address for your payments. Typically, the first payment is due 30 days from close of escrow, but there are exceptions to this. Check your copy of the Note for the exact date.
  • If your property is affected by a Homeowners Association, you should receive payment information from the management company in the weeks following the close of escrow. Call the management company if you do not receive notification from the association.
  • You may receive one or more Supplemental Property Tax bills after close of escrow. Your Escrow Officer can answer questions about bills which were reported during the escrow period. Contact the Tax Assessor’s Office for questions about other bills you may receive. If your loan has an impound account, notify your lender if you receive any supplemental tax bills.

Reminders for both Seller and Buyer:

  • Real property tax bills are mailed in late October of each year. Sellers who receive the bill after escrow closes can be helpful if they forward the bill to the Buyer. As a Buyer, if you do not receive the original bill, a copy can be obtained from the Tax Assessor’s Office. Remember the first installment must be paid by December 10 and the second installment must be paid by April 10. If you need a copy of the tax bill, contact the Assessor early to avoid late penalties on your tax payments.
  • If you have not already done so, provide your Escrow Officer with your correct post-closing mailing address. This will assist the Escrow Officer in forwarding documents or communicating with you after the escrow has closed.
The Buyer is Generally Responsible For:
• Title insurance premiums (ALTA Loan Policy)
• Escrow fee and all miscellaneous fee’s related to escrow services and products
• Recording changes for all documents in Buyer’s names
• Termite inspection (according to contract)
• Tax pro-ration (for date of acquisition)
• Homeowner’s transfer fee (if applicable)
• All new loan charges (except those required by lender for seller to pay)
• Assumption/Change of records fees for takeover of existing loan (if applicable)
• Beneficiary statement fee for assumption of existing loan (if applicable)
•Inspection fees (roofing, property inspection, geological, etc.)
• Home warranty (according to contract)
• City transfer/conveyance tax
• Fire insurance premium for first year
• Buyer’s portion of sub-escrow fee
• Escrow fee (according to contract)

The Seller is Generally Responsible For:
• CTLA/ALTA Homeowners policy, if available; if not, standard CLTA owner’s title insurance
• Real estate commission
• Document preparation fee for deed
• Documentary transfer tax ($1.10 per $1,000 of sales price)
• Any city Transfer/Conveyance tax (according to contract)
• Any FHA or VA loan fees required by buyer’s lender (if applicable)
• Payoff of all loans in seller’s name (or existing loan balance if being assumed by buyer)
• Interest accrued to lender paid off, statement fees, reconveyance fees and any prepayment penalties
• Termite inspection (according to contract)
• Termite work (according to contract)
• Home warranty (according to contract)
• Any judgments, tax liens, etc. against the seller
• Recording charges to clear all documents of record against seller
• Tax pro-ration (for any unpaid taxes at time of transfer of title)
• Any unpaid homeowner’s dues (if applicable)
• Any bonds or assessments
• Any and all delinquent taxes
• Notary fees
• Escrow fee (according to contract)
• Demand fees