By Jaime Silveira

BRE #01706045 

When buying or selling a home you are going to hear the term escrow, often. The successful close of that escrow is what needs to happen for title to transfer in or out of your name or trust. In its simplest definition, “Escrow refers to a financial instrument, typically an account, which is maintained by a neutral third party on behalf of two other parties engaged in a financial transaction, like a home purchase.” This is a direct quote from bankrate.com.

Having worked through hundreds of escrows, I can tell you it is much more than that! I want to take a moment to give a shoutout to our local escrow and title companies. I can easily say we have some professional and top-notch companies in our area to work with. They act as an impartial stakeholder or depository in a fiduciary capacity for all documents and monies required to complete the transaction as directed by the interested parties’ written instructions.

The life of an escrow begins with an offer and acceptance that was skillfully negotiated by the real estate agents representing the buyer and seller. From the start of opening an escrow these are the documents, though transaction-dependent, that are typically kept track of by the escrow officer. The purchase agreement and any counter offers or addendums are considered the “instructions.” These instructions have been mutually agreed upon by the buyer and seller, and are what the escrow officer will make sure to follow. Along the way, if any term or price were to change, escrow would need a new set of instructions to reflect said changes in their documentation. The new instructions typically come in the form of an addendum and are signed by both buyer and seller. 

Importantly, the funds that are typically held in escrow are the initial deposit (earnest money) and the complete funds to close, including lender funds. Escrow will also handle the disbursement of monies to the seller. Prior to the release of funds to a seller, escrow has the job to verify that the seller is the rightful owner of the property and has the authority to sell the property. This is where the Title Department comes in. Documents are requested and verified to confirm ownership.

In addition to the invaluable work that is done in escrow, it is also critical to consider how the buyer will take title when purchasing a home. The buyer will be asked, “How would you like to hold the title for the property? Who will be the owner?” For a buyer, contacting a Certified Public Accountant (CPA) or an attorney is helpful when determining the best approach for your purchase.

Neither a real estate agent nor an escrow officer can advise you on how you should take title of a property.

There are many ways to take title, all with different benefits that should be researched carefully. A CPA or attorney may take things even further and recommend a trust be established. In my experience, a trust significantly helps with the sale of a property, especially when the owner has passed. A trust will make it easier for the family or party that is inheriting the property to sell it if they wish. A trust will keep the property/estate out of probate, which can be lengthy and expensive to the estate. 

Overall, escrow creates a balanced environment where both parties can feel secure throughout the transaction process. Only being able to execute direction because of the mutually signed documents by the buyer and seller, making sure both parties’ interests are fulfilled. I know I rely heavily on our local escrow officers and their professionalism, expertise, and experience. Their diligent work and attention to detail provide invaluable peace of mind throughout the transaction process. They ensure that everything goes smoothly and efficiently, ultimately resulting in a successful transfer of real property.

Knowing I can count on them makes a significant difference in my real estate dealings!

Resource: fntic.com/lifeescrow.aspx

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