Exactly what is Escrow? There is an episode of Friends (Season 10 Episode 14 to be exact), where Chandler and Monica are buying a home and they ask Joey to come and see the home.  The conversation went like this:

Joey: “But no, it’s not close. You said it was in escrow? I couldn’t even find it on the map.”

Chandler: “No Joey, escrow is… there’s money in… it’s not the bank exactly… I don’t know what it is.” (LOL!)

So it’s not just you, “escrow” is simply confusing, until now. Not only am I a Real Estate/Mortgage Broker, I ran an escrow desk at an independent escrow company in Southern California for 10 years. That was the best thing I ever did for my career, as I gained so much knowledge. I saw the BIG PICTURE, in volume. Not just 1 or 2 deals a month, but 35-45 deals a month. Here is what I learned about the principle, process, and purpose of escrow.

First of all “escrow” is a place (the escrow office) and  escrow is a process (when you are a party to a real estate purchase agreement you are in escrow). But in order to help  you  understand, let’s briefly touch on the principle, WHY escrow?

Escrow’s purpose to help two or more parties facilitate an agreement. So as the buyer or seller in a transaction, you open escrow in order to ensure that terms of the contract are met BEFORE anyone gets the money or the property.

As the Buyer, the escrow office makes sure the title to the property is clear, all the inspections you asked for are accounted for, that the loan documents are properly completed, and the documents needed to transfer title are properly filed. You have a lot of money on the line, escrow’s job is to make sure that they process the paperwork as needed to ensure everything is in order BEFORE the seller gets your money. As the seller, they make sure the money is good funds. The check is going to be held in escrow. If the check bounces you will be informed. So until all the funds are in escrow and those funds are good, the Buyer gets nothing.

Escrow is your friend. (I forgot to add that part).

So hopefully that sheds a little light on WHY escrow. So now that just leaves WHO, WHAT, WHEN, AND WHERE.  Below is a Basic Flow Chart.

The WHO in escrow, is the buyer and the seller. Is either party you are what is referred to as the principals to the Escrow. Escrow works for you, the principal, not your agent nor your loan officer, but you and the other party. Their job is not to take either the Buyer’s side nor the Seller’s side, but to help you both facilitate your agreement. You set the terms together, you can agree to change the terms, etc. and Escrow will assure you both comply with what you have agreed to. As a side note, if you both don’t agree, Escrow is stuck and cannot proceed. They are not licensed to practice law and cannot make a decision for you, but once you compromise Escrow will draw up new terms and get you both back on track.

Now WHAT? No really, now the WHAT. The “what” is the agreement itself. Every single escrow is different. When your agent opens escrow for you, you will be assigned a number. The escrow number, the property, the buyer, the seller, the price, and terms are all unique. Escrow reads your contract and what each party agrees to, so they now what they need to collect paperwork wise to ensure that those terms are met. Then they work with all parties, both buyer and seller, both agents, the lender, title, and anyone else they need to, to complete the file. They collect documents from everywhere. Once the file is complete you are ready to close escrow.

Escrow is open WHEN the purchase agreement and any counter offers or addendums are agreed upon and  closing occurs when the file is complete and both parties are ready to close. And WHERE is simply the Escrow companies, place of business. So that does it, your first lesson in Escrow 101. Check out the list of common documents collected.

Tezra Rogers is a Real Estate Broker/Loan Officer (CA DRE #01744515/NMLS #01466173) with 17 years experience and at last count, 816 transactions under her belt . Her clients become family, and in this house there is always room for more. You may contact her at trogers@pacificbayestates.com or at the corporate office in Suisun City, CA at 707.759.4251. Follow her on IG @pacbaybroker.

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