Escrow
Process in Manhattan Beach
What
is escrow?
An escrow
is a deposit of funds, a deed or other instrument by one party
for the delivery to another party upon completion of a particular
condition or event. The California Escrow Law – Section
17003 of the Financial Code – provides the legal definition.
Why
do you need escrow in the South Bay?
Whether
you are the buyer, seller, lender or borrower, you want the
assurance that no funds or property will change hands until
all of the instructions in the transaction 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 provisions of the escrow have been complied with.
How
does escrow work?
The principals
to the escrow – buyer, seller, lender, borrower –
cause escrow instructions, most usually in writing, to be
created, signed and delivered to the escrow officer. If a
broker is involved, he will normally provide the escrow officer
with the information necessary for the preparation of your
escrow instructions and documents.
The escrow
officer will process the escrow, in accordance with the escrow
instructions, and when all conditions required in the escrow
can be met or achieved, the escrow will be "closed."
Each escrow, although following a similar pattern, will be
different in some respects, as it deals with your property
and the transaction at hand.
The duties
of an escrow holder include; following the instructions given
by the principals and parties to the transaction in a timely
manner; handling the funds and/or documents in accordance
with the instruction; paying all bills as authorized; responding
to authorized requests from the principals; closing the escrow
only when all terms funds in accordance with instructions
and provide an accounting for same – the Closing or Settlement
Statement.
Who
chooses the escrow company?
The selection
of the escrow holder is normally done by agreement between
the principals. It is fairly customary for the seller to choose
the escrow company in Manhattan Beach. If a real estate broker
is involved in the transaction, the broker 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. In the South Bay the
escrow company is usually chosen by the seller or seller's
agent. 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.
What
do you need to do while in escrow?
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 the instructions.
Your escrow
officer is not an attorney and cannot practice law; you should
consult your lawyer for legal advice. Do not expect your escrow
officer to advise you as to whether or not you have a "good
deal" or are doing things the right way. The escrow officer
is there to follow the instructions given by the principals
in the escrow.
In order
to expedite the closing of the escrow, you should check with
your escrow officer as to what specific items you could do
to assist. Ask the question – "What can I do to
expedite the closing of this escrow?"
Respond
quickly to correspondence. This will assist in the timely
closing of the transaction.
If you
are required to deliver funds into the escrow, make sure that
you provide "good" funds in the form required by
the escrow officer. Company procedures differ in this regard,
and there are many ways you can help at the time of closing;
check with your escrow officer. Do not give the escrow officer
a personal check and expect the escrow to close immediately;
the escrow can only close on cleared funds, and the processing
of a personal check can take days, possibly even a week or
more.
When the
escrow officer closes the escrow, some of you may want the
closing papers, checks, title policies, statements, etc. Made
available immediately. There are many aspects to the closing
of the escrow, and some of these cannot be processed on the
day of the closing; they may take several days. If you have
a special need, for example, a cashier’s check on the
day of closing, you should communicate that need to the escrow
officer early in the processing of the escrow.
Escrow
and a South Bay home loan
If you
are obtaining financing, your escrow officer will be in touch
with the lender who will need copies of the escrow instructions,
the preliminary title report and any other documents escrow
could supply. In the processing and the closing of the escrow,
the escrow holder is obligated to comply with the lender’s
instructions.
It has
become a practice of some lenders to forward their loan documents
to escrow for signing. You should be aware that these papers
are lender’s documents and cannot be explained or interpreted
by the escrow officer. You have the option of requesting a
representative from the lender’s office to be present
for explanation, or arrange to meet with your lender to sign
the documents in their office.
What is the closing statement?
A closing
statement is an accounting, in writing, prepared at the close
of escrow which sets forth the charges and credits of your
account. The items shown on the statement will reflect the
purchase price, the funds deposited or credited to your account,
payoffs on existing encumbrances and/or liens, the costs for
all services and a determination of the funds you are entitled
to at the close of the escrow. When you receive your closing
papers, review the closing statement; it is extremely logical
and reflects the financial aspects of your transaction. If
anything does not make sense to you, you should ask your escrow
officer for an explanation.
When going
through your closing papers, examine all of them; there may
even be a refund check hiding in there. Cash the check quickly,
please. Be sure to have the check properly endorsed. All payees
must endorse the check. This will eliminate the check being
returned unpaid due to irregular or missing endorsements.
Your closing
statement and all other escrow papers should be kept virtually
forever for income tax purposes.
Your accountant
will need the information about the sale or purchase of the
property. IRS and other agencies may require you to prove
your costs and/or profit on the sale of any property. The
closing statement will assist in this task.
Do not
rely on your escrow holder retaining the escrow file so that
you can "always call and get copies of the closing statement."
Most escrow holders will be destroying the files after the
statutory retention period, usually five years. Maintaining
and storing the closed escrow files is a costly endeavor to
the escrow holder. Therefore, a nominal fee may be charged
by your escrow holder for the retrieval of a file from storage,
photocopying the requested documents and returning the file
to storage.
What
Fees and Costs will be Charged?
Escrow
fees are not regulated by the State. Escrow holder, like any
other businesses, will charge fees that are commensurate with
the costs of producing the service, the liability undertaken,
and the overhead expenses which include a profit factor. Therefore,
the fees will vary between companies and from county to county.
Normally, the escrow holder will follow its minimum fee schedule,
which will provide for extra charges based upon the differing
elements of your escrow. On occasions, an additional fee will
be charged for unusual expenditures of time on a given transaction.
The escrow
holder has no control over the costs of other services that
are obtained, such as the title insurance policy, the lender’s
charges, insurance, recording charges, etc.
Your escrow
officer, upon request, can provide you with an estimate of
the escrow fees and costs as well as fees charged by others,
provided such information is available.
