The escrow company is a neutral third party that will assemble and process all of the components of a real estate transaction (including legal documents), records the transaction, and ultimately, disburse and distributes funds according to the buyer’s and seller’s instructions.
After the buyer and seller agree to all provisions of the residential purchase contract (RPC), they sign it and deliver it to the escrow company or title insurance company. The escrow company then assigns an Escrow Officer and an Escrow Number – and escrow on your new home is officially open. The buyer will receive instructions about how to deposit their earnest money deposit, and must do so within three days of an agreed upon contract.
An escrow account allows buyers and sellers to interact with no risk. Before the buyer assumes title to the property, he or she must deposit into escrow all funds associated with buying the home. Any of the participants can initiate the opening of escrow, usually the real estate agent. In for-sale-by-owner (FSBO) transactions, no agent is involved, and escrow can be opened by the buyer, the seller, or both.
As a neutral third party, the escrow officer holds all monies submitted by the buyer, and secures a deed from the seller. After all the terms of the purchase contract have been met, the escrow agent releases funds to the seller and transfers the deed to the buyer. In addition, they act as a go-between who is responsible for:
Reviewing the purchase contract and title commitment
Processing and keeping track of all related documents and funds
Meeting any requirements of the lender Keeping all parties apprised of the progress with weekly updates
Coordinating property payoff and lien information with the seller Receiving and distributing funds as instructed
Overseeing the buyer’s loan document signing Obtaining the seller’s signature on the deed and related documents
It is imperative that you respond to escrow in a timely manner. As soon as you receive your Buyer’s Opening Package, sign and return all forms immediately. Tell your escrow agent in advance if you will be out of town during escrow, or if you will need a translator or after-hours service. Always respond promptly to requests by your lender and escrow agent because you are all working together to close escrow on time. A good escrow officer moves the process smoothly and securely to provide the seller with a check and the buyer with the keys to their new home.