Mutual acceptance of purchase contract has been
received! A copy of the fully executed contract
along with the buyer's deposit will need to be
delivered to escrow.
1. Prepare Escrow Instructions. These are done
on the escrow holders printed forms. All
principals the buyer and seller -- sign
the instructions, which set forth the parties
understanding of the transaction. An initial deposit
usually accompanies the instructions. For a home
purchase, the instructions must include:
Purchase price and terms;
Agreement as to mortgages;
How buyers title is to appear (called
Matters of record subject to which buyer
is to acquire title;
Inspection reports to be delivered into
Proration adjustments (involves taxes and
Date of buyers possession of the
Documents to be signed by the parties,
delivered into escrow, and recorded;
Disbursements to be made, costs and charges
and who pays for them; and
Date of closing.
2. Order Title Search. This title search is performed
on the subject property, resulting in a Preliminary
Report from a title company. The escrow
holder examines this report for items not contemplated
in the instructions. For example, is there a lien
(or additional loan) on the property that wasnt
reported? The seller must clear any such item
or it must be brought to the attention of the
3. Request Demands and/or Beneficiary Statements.
This request for information goes to any lenders
of record. The document will be either:
a Demand for Pay-off, if
the sellers existing loan is to be paid
in full through escrow; or
a Beneficiary Statement, if
buyer is purchasing the property subject
to or assuming a loan.
4. Seller to order Structural Pest Control Report
and Buyer to order and review home inspection
reports. These reports might include plumbing
or roofing reports. They all pertain to the propertys
condition, and are kept in escrow. The escrow
holder might also obtain any necessary approvals
from the seller or buyer due to information in
a report. For example, whether the home needs
to be sprayed for insects.
4 a) Seller will provide signed property disclosures
with any known defects or alterations to the buyer,
who will sign to acknowledge receipt.
5. Accept New Loan Instructions and Documents.
This happens if the buyer is obtaining new financing
for the home. The escrow holder also obtains the
buyers approval/execution of the documents.
The escrow agent must also satisfy all lenders
instructions before using the lenders funds
to complete the transaction.
6. Accept Fire Insurance Policies and Complete
Settlement. By this step, its almost time
to close the transaction. Here, following the
buyers and sellers instructions, the
accepts and delivers any fire insurance
policy and transfers the insurance;
makes all payments on property taxes and
insurance (called prorations);
completes the accounting (settlement) details;
informs the principals that escrow is ready
7. Request Closing Funds. The escrow holder cannot
disburse any funds until all items, such as checks
or drafts, have cleared and become available for
8. Audit File in Preparation for Closing. In
this step, the escrow holder:
accounts for all funds and documents; and
determines that the parties have complied
with all escrow instructions.
9. Order Recording. At this point, the escrow
holder authorizes the title company to run the
sellers title and to record the necessary
documents. This can happen provided no change
has occurred in the sellers title since
the preliminary title report was issued.
10. Close Escrow. This is what youve been
waiting for! Closing the deal. The escrow holder
can close escrow after confirming
preparing settlement statements for buyer
disbursing all funds; and
delivering documents to the party or parties