What is Escrow?
An escrow is created when two or more persons deposit money and/or documents with a third party, which are to be delivered upon the happening of certain conditions.  The third party is known as the escrow agent or escrow holder.

The authority given to an escrow holder is strictly limited by instructions provided by the parties involved.  Consequently, an escrow holder acts on mutual instructions deposited into escrow and DOES NOT represent any party.  The escrow officer is authorized by instructions to allocate funds for items during the escrow period, such as real estate commissions, title insurance, liens, recording fees and other closing costs.  Instructions also specify the method of collecting funds, proration issues, time limitations and all the terms of the transaction.  The escrow process protects all parties involved by retaining money and documents until the mutual instructions are met.

The statutory definition of escrow is found in Section 17003 of the California Financial Code and reads as follows: “Escrow” means any transaction wherein one person, for the purpose of effecting the sale, transfer, encumbering, or leasing of real or personal property to another person, delivers any written instrument, money, evidence of title to real or personal property, or other thing of value to a third person to be held by such third person until the happening of a specified event or the performance of a prescribed condition, when it is then to be delivered by such third person to a grantee, grantor, promisee, promisor, obligee, obligor, bailee, bailor, or any agent or employee of any of the latter.

Why is Escrow Needed?
Whether you are the buyer or the seller, you want assurance that no funds or property will change hands until all instructions
have been followed. With the increasing complexity of business, law and tax structures, it takes a trained professional to
supervise the transaction..

Who Chooses the Escrow?
The selection of the escrow holder is normally done by agreement between the principals. If a real estate agent is involved,
they may recommend an escrow holder. However, it is the right of the principals (seller and buyer) to use an escrow holder who
is competent and experienced in handling the type of escrow at hand. You can ask a real estate agent or lender to recommend
two or three different escrow companies to choose from. You may also fi nd escrow companies listed in the yellow pages of the
phone book under either Real Estate Escrow, Escrow or Real Estate Title Insurance.

Escrow Functions Typically Include the Following Valuable Transaction Services:
• Prepare escrow instructions
• Serve as the communication link to all transaction parties
• Request preliminary title report/commitment from Lawyers Title
• Request a benefi ciary’s statement or pay-off demand relating to existing fi nancing
• Comply with lender’s requirements as specifi ed in escrow agreement
• Receive purchase funds from the buyer
• Prepare or secure the transfer deed or other documents related to escrow
• Prorate taxes, interest, insurance and rents according to instructions
• Secure releases of all escrow contingencies or other conditions as required
• Record deeds and any other documents as instructed
• Request issuance of the title insurance policy as instructed in Purchase Contract
• Disburse funds as authorized, including charges for title insurance, recording fees, commissions and loan payoffs
• Prepare fi nal accounting statements for the parties
• Escrow is considered “closed” when all documents are recorded and instructions have been carried out

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