Jim Valentine: The escrow in real estate

When you are involved in a real estate transaction you end up dealing with an escrow. Escrow is a funny name to the uninitiated for a very important part of the process. Escrows get “opened,” “closed,” delayed and more to the extent that they seem to have a life of their own. In reality, they are influenced by the participants whose actions, or inactions, dictate the character of the escrow for that transaction.

An escrow is a process where one party holds property or money until conditions have been met. In real estate it is a disinterested third party that will hold the deed on one side and the funds from the other side. When the conditions of the contract are complete the escrow holder will give the signed deed to the buyer and the sale proceeds to the seller to effectively “close” the escrow.

While that is the essence of the escrow process, the actual work involved is so much more than that. Escrow officers and their team work very hard with very detailed precision on many files all day long. They are the ones that make sure that many of the terms are met. As such, they are charged with finding out the daily balance of any existing loans, status of real property taxes, determining if there are any outstanding water/sewer or HOA obligations, reviewing the seller’s status to make sure he has the right to sell the property, acknowledging the insurance binder, working with the lender on the many details of the loan, working with an accommodator if the sale is an exchange, etc.

They process the invoices from inspectors and tests to be paid through escrow. If it is a probate sale they will assemble the court documentation. If the owner is financing the sale they will organize the drawing of the promissory note and related deed of trust so they can be signed with the rest of the escrow documentation.

The core documents in an escrow are what are called escrow instructions. Escrow instructions line out the instructions from the buyer and seller for the escrow holder to follow. The terms of the transaction are specified, the conditions of the transaction are listed, and support documentation is included for review such as a title commitment. In some larger transactions the escrow holder will simply use the terms of the sales agreement between the parties as their instructions with their boilerplate material attached.

The escrow holder does not take a side in the transaction. They are there to represent all parties to see that they are protected. When the escrow closes they not only pay the seller, but they pay real property taxes, loan balances, HOA fees, inspection/investigation fees, Realtor compensation, repair invoices, IRS liens if any, distribution of funds if more than one destination for the proceeds, and more.

Escrow holders work exceptionally hard with great precision. They have a lot of eyes watching their every move behind each of which is someone with an interest in the outcome. There can be a lot of emotion in a residential real estate transaction some of which can boil over at times when things don’t quite go as planned or hoped. A good escrow officer will keep her cool and navigate things to a smooth closing as long as the parties and their agents do their respective parts to achieve their common goal – the close of escrow.

There is a lot more to completing a real property sale than agreeing on price and shaking hands. The details are many, each with consequences if not addressed correctly. A good escrow officer is like a good agent, worth their weight in high value ore.

When it comes to choosing professionals to assist you with your Real Estate needs… Experience is Priceless!  Jim Valentine, License No. BS-03481, RE/MAX Gold Carson Valley 775-781-3704. dpwtigers@hotmail.com.