Northern California

An Escrow is money, property, a deed, or a bond put into the custody of a third party for delivery to a grantee only after the fulfillment of the conditions specified.

An Earnest Money deposit is the amount the Buyer gives the escrow company at the time the escrow is opened.  This amount is negotiable and is usually somewhere between $1,000 and 1% of the purchase price.  Escrow should be opened as soon as possible after a contract is agreed to and signed by all parties.

The Real Estate Settlement Procedures Act (RESPA) states that title and escrow company(ies) are the choice of the Buyer, unless the Seller agrees to pay the fees.

(Handout:  United State Code: Title 12 states that “(a) No seller of property that will be purchased with the assistance of a federally related mortgage loan shall require directly or indirectly, as a condition to selling the property, that title insurance covering the property be purchased by the buyer from any particular title company. (b) Any seller who violates the provisions of subsection (a) of this section shall be liable to the buyer in an amount equal to three times all charges made for such title insurance.” )

Both the time frames for the opening of escrow and the closing of escrow are agreed to in the contract. Escrow should be “opened” as soon as possible after a contract is agreed to and signed by all parties.  The length of time an escrow is open depends on several things.  Some of these are the buyer and seller moving dates, availability of inspectors and repairmen, availability of the appraiser.  But the most important of these is the time the lender needs to qualify the buyer, approve the property, type up the loan documents and actually fund the loan.  Escrow is “closed” when the deed is transfer into the name of the buyer and the seller receives the purchase money.

A transfer of the ownership of real property involves not only the preparation of necessary documents but also an examination and interpretation of public records for matters affecting that property in order to ascertain rights, interest, and liens of others.  A policy of title insurance is an insured statement of the condition of the title of a particular piece of property.  The policy shows who owns the land according to the public records and also what is recorded against the property in the way of taxes, mortgages, deeds of trust, and any other liens and encumbrances of record.  The title policy is a policy of indemnity since the title insurance company is insuring against loss in the event that its interpretation of the condition of title is incorrect.  The beneficiary of the insurance is either the buyer of the property or the lender, or both.  Before issuing a policy, a title insurance company will perform an extensive search of the relevant public records to determine an any individual, other than the seller, including government entities, has any right, lien, claim, or encumbrance which must be taken into account.  A general misconception is that title insurance covers everything.  There are many exceptions.  The most common is probably that the plat map is an indicator of the location of the boundary lines.

The interaction between the title and escrow companies depends on which county in California the property is located.  In Northern California it is more common that the title company is an invisible arm of the escrow company.  If that is the case, the escrow officer will request a preliminary title report from the title department for you.  That may not be the case in other areas of California.

The Buyer signs loan and escrow documents about one week prior to close of escrow.  This amount of time is needed so that the loan underwriter can check that the documents are correct and get the funds to the escrow company.  All documents must be signed and all funds must be in the escrow account the day before escrow closes (there are rare exceptions to this).