Why Choose an Independent Escrow Company?
The responsibility to protect the consumers' interests should not be taken lightly. The escrow holder must remain impartial during the escrow period to ensure fair representation of all parties. It is crucial, then, that the broker, lender or consumer makes a knowledgeable and informed decision in choosing an escrow company
How Does An Escrow Work?
The principals to the escrow - buyer, seller, lender, borrower - cause escrow instructions to be created, signed and delivered to the escrow officer. If a broker is involved, he or she will normally provide the escrow officer with the information necessary for the preparation of your escrow instructions.
Escrow—What Is It?
Very simply defined, 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 I Need Escrow?
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.
Escrow—How Does It Work?
The principals to the escrow - buyer, seller, lender, borrower - cause an escrow to be created. If a broker is involved, he or she will normally provide the escrow officer with the information necessary for the preparation of your escrow instructions.
The escrow officer will process the escrow, in accordance with the escrow instructions, and when all conditions required in the escrow are 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 instructions; paying all bills as authorized; responding to authorized requests from the principals; closing the escrow only when all terms and conditions have been met; and distributing the funds in accordance with instructions and provide an accounting for same - the Closing or Settlement Statement.
Who Chooses The Escrow?
The selection of the escrow holder is normally done by agreement between the principals. 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.
What Do I Have 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. 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 must do to accomplish the closing.
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 of a wire transfer or cashier’s check drawn on a California bank.
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 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, you should communicate that need to the escrow officer early in the processing of the escrow.
Excerpted from Real Estate ABC.com
Why Use an Independent Escrow Company?
Excerpted from The Escrow Institute of California
Most real estate transactions in the State of California utilize the services of an escrow company. Ironically, escrow remains one of the least understood elements of the real estate process.
Because of this, buyers and sellers often place their faith in the real estate broker or lender to recommend an escrow company. What many consumers don't realize, however, is that they are entrusting this escrow company to safeguard their funds being held in trust. In addition, it is the primary responsibility of the escrow holder to ensure that all of the necessary instructions in the real estate agreement are executed.
The responsibility to protect the consumers' interests should not be taken lightly. The escrow holder must remain impartial during the escrow period to ensure fair representation of all parties. It is crucial, then, that the broker, lender or consumer make a knowledgeable and informed decision in choosing an escrow company.
“Licensed” vs. “Controlled”
All escrow companies in California can be classified into two basic categories: Licensed or Controlled. “Licensed” escrow companies are independent businesses licensed by the California Department of Corporations. This license regulates the procedures and practices of the companies and subjects them to stringent requirements designed to protect consumers.
“Controlled” escrow companies are non-licensed businesses that can be owned by a variety of entities, including real estate brokers, mortgage brokers, banks, savings and loans, and title insurance companies. Such companies fall under the jurisdiction of a variety of supervising agencies, with regulations and requirements that vary widely. One fact remains constant, however, none of the agencies have regulations as strict as those imposed on the escrow companies licensed by the Department of Corporations.
Although the majority of escrow companies are honest and above board, the large sums of money handled by escrow companies can entice unscrupulous individuals to abscond with the funds they are holding in trust. And unless the escrow company is bonded, there is often no safeguard assuring the return of the money to consumers.
Licensed escrow companies are consumers' best bet for safeguarding their funds. All licensed escrow companies are required to be members of the Escrow Agents' Fidelity Corporation, which provides fidelity coverage for member trust accounts in the amount of $5 million. This fidelity bond guarantees that in the event of theft of trust accounts, the consumers' funds are protected.
The stringent requirements by the Department of Corporations assure that every licensed escrow company has met the highest standards in the industry. Consumer protection regulations unique to licensed escrow companies include:
- A Certification Program for all escrow officers in the company's employ, including fingerprinting and background checks by the Department of Justice;
- A requirement that an escrow officer with at least five years experience be on-site;
- Financial stability requirement, including at a minimum one CPA audit a year; and, frequent surprise examinations conducted by the Department of Corporations;
- Prohibiting employment of convicted felons or anyone who has been disbarred from the real estate industry;
- Membership with the Escrow Agents' Fidelity Corporation which provides a $5 million fidelity bond;
- Company's sole business is doing escrow, which requires a higher level of state regulatory requirements and oversight.
Neutral Third Party
The bottom line is that a licensed escrow company is the best possible neutral third party to complete your real estate transaction. Whether searching for an escrow holder yourself, or looking to recommend one to a client, a licensed escrow company gives you peace of mind.
Escrow companies are governed by the “Escrow Law”, contained in Division 6 of the California Financial Code, and regulated under Title 10 of the California Code of Regulations.
Inquiries regarding escrow licensees may be directed to the Department of Corporations, 321 West Fourth Street, Suite 750, Los Angeles, California 90013 (213-576-7610)
Escrow Agents' License Bond and license mandated membership in Escrow Agents' Fidelity Corporation, a California non-profit mutual benefit corporation, is found in Section 17312 of the California Financial Code. Requirements for Maintenance of tangible net worth and excess of liquid assets are set forth in Section 17210 of the California Financial Code.