Answers to common questions about Escrow

Patrick McCarranBy Patrick McCarran, Berkshire Hathaway HomeServices

An offer has been accepted and a closing date has been set. Now the home is about to go through escrow. But what does that really mean? The following are answers to some of the most commonly asked questions about escrow and the escrow process.

What is escrow?

Escrow is a process that begins when the offer papers are signed by both parties and ends when the loan is approved and both the buyer and seller have fulfilled all the necessary requirements. For instance the escrow company will obtain instructions from all parties such as the lender, the seller and the buyer. Once these instructions have been met or completed then the escrow company will redistributed to the involved parties such as the buyer will receive title or ownership of the property, the seller will receive funds, the sellers lender with be paid off and the buyers lender will receive loan documents that the buyer has agreed to repay.

What is an escrow holder?

The escrow holder is a neutral third party agent of the principals—buyer, seller, lender, and borrower—which facilitates the transfer of ownership by ensuring that the terms of the transaction are completed. This includes safeguarding all funds (including the buyer’s deposit) and documents. Once all the details have been settled, the escrow holder disburses the funds and documents to the appropriate parties.

What does the escrow have to do with items that must be done to the property before it is sold?

Escrow is also a process. The escrow company keeps track of various terms and conditions throughout the term of the contract and acts as an enforcer for both sides insuring that contract terms are honored. The escrow holder keeps track of obligations of the seller or buyer. For example, if the seller is required to supply a termite inspection, the escrow holder would make sure it is fulfilled before any funds are transferred to the seller. Findings in the termite inspection report must be corrected on or before the close of escrow.

How does the escrow company interact with the title company?

The escrow holder receives a complete ownership history of the property and any liens on record in the preliminary title report. Anything that is out of the ordinary, such as condo liens, judgments, etc., against the buyer and seller must be clarified prior to close of escrow.

Why does the escrow process take so long?

The escrow process can be any number of days depending on what is agreed upon between the buyer and the seller. To assure a timely closing, you can check with the escrow holder on specific items that will help move the process along. For example, the buyer should do things like inform the escrow holder of the name and phone number of his or her insurance agent as soon as possible. The homeowners insurance policy needs to be ordered early, so verification can be made with the lender. The lender will not fund a new loan without a homeowners policy. If there is a delay, the escrow process may be delayed. It also helps to make sure that the funds provided are “good” because the escrow will only close on cleared funds. You want to consider a more secure form of payment, rather than a personal check, which can take up to a week to process.

What happens with the check I give to the escrow company?

Most buyers think that their check will not be cashed until the close of escrow, but that is not the case. The check is cashed by the escrow company immediately, and held in a trust account. If anything out of the ordinary is to be done at the close of escrow with the seller’s proceeds, the escrow holder must be notified. A signed amendment is required for wiring funds or splitting proceeds.

If you have questions about the escrow process, confer with your real estate professionals who can help provide you with more detail with this or any other home buying or selling subject..

Patrick McCarran is a local Realtor and can be reached at (925) 899-5536, or

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