WHAT IS ESCROW?
Escrow is an impartial third party process in which documents and funds are deposited by buyers, sellers, and lenders to facilitate the closing for a real estate transaction. Escrow is required to follow mutual written instructions from all parties. Escrow will coordinate with the buyer, seller, and lenders to obtain required signatures on all documents, work closely with the title officer to clear liens and encumbrances against the property, and record the documents with the county.
Why do I need escrow?
Escrow assures all parties to the transaction that no funds are delivered and no documents are recorded until all conditions in the transaction have been met.
How do I open escrow?
Opening escrow is the first step in the closing process. Generally, to open escrow, the parties to a transaction deliver to an escrow company the earnest money check and the purchase and sale agreement, which outlines the transaction and provides the closing date, contingencies and financing details. Anyone involved in a transaction can “open the escrow” but generally your real estate agent will do so. In the case of a for sale by owner or FSBO, the buyer, the seller or both may open escrow.
Who sets the closing date?
The buyer or seller may select the closing date, but both must agree to it. The purchase and sale agreement may state the closing date as “Closing to occur on or before October 20th, 2015.” In most cases, closing occurs 30, 60 or 90 days from the date a purchase and sale agreement is signed.
What do closing costs include?
The closing costs will include title search fees, taxes, notary fees, and loan fees, escrow fees, recording fees, reconveyance fees, the real estate sales commission and other charges.
Who selects the escrow company?
The parties involved in the transaction decide which escrow company will close the transaction. Although it is very common for your real estate agent to recommend an escrow closer, the parties have the right to choose an escrow closer they feel is competent and experienced. The law prohibits escrow companies from paying referral fees to real estate agents, to protect the parties’ right to select their own escrow closer.
Working with buyers:
Washington State Collected funds law requires money to be deposited into escrow timely for closing, recording and disbursement. Good funds are as follows:
- Cash or wire transfer
- Cashier’s check: drawn only on a Washington State Institution, deposited into escrow 24 hours prior to closing & recording.
- Personal checks: must be deposited 10 business days prior to closing & recording
Working with Seller’s:
Per MLS form 21, paragraph F: “Closing “means the date on which all documents are recorded and the sale proceeds are available to the seller.
Buyer’s funds will be deposited into escrow per the Collected Funds Law of Washington State, as noted above. Their funds are typically deposited into escrow 24 hours prior to recording.
In most cases, if the buyer is working with a lender for the balance of the sale funds, the lender will wire the loan funds into escrow on the day of recording. When Escrow is in receipt of all funds, the deed will be released for recording with the title unit and county.
Upon receipt of recording numbers, escrow is authorized to disburse funds to pay sellers costs, such as commissions, payoffs, taxes, etc. Escrow is also authorized to disburse the proceeds to the seller. Proceeds can be disbursed as follows:
- An escrow check can be issued by 5 pm the day of recording.
- A wire transfer of proceeds can be sent to the seller’s bank on the next business day following recording.