The second requirement of a valid escrow is a conditional delivery of transfer documents and funds, and means the seller will deliver a signed grant deed that conveys title to the buyer. The buyer and/or the lender will deliver to escrow the funds that are required to complete the sale.
The escrow agent holds the security for any loan (trust deed) conditionally until directed by the terms of the escrow. The escrow agent keeps all documents and funds until all other terms of the escrow are completed. Then the agent distributes or disburses the money according to the expressed conditions of the escrow.
Sometime before escrow closes, the seller will be asked to sign a grant deed conveying title to the buyer. Because the seller will sign over ownership to the buyer before getting any money, the escrow holder is instructed to hold the signed deed until funds from the buyer are deposited in escrow and all other terms of the escrow have been met. Conditional delivery of the grant deed has been made by the seller.
Toward the end of the escrow period, the buyer will sign a note and trust deed for the loan in the presence of a notary. The buyer is promising to pay back the money, using the property as security for the loan. Escrow has not closed, and the buyer does not yet own the property. Nor, has the seller received the promised money, but the note and trust deed are signed and deposited into escrow, conditionally, until all other terms have been met. Only then will escrow request loan funds.
The escrow is closed when all the terms and conditions of the escrow are met. Upon close of escrow, the buyer gets the grant deed, after it has been recorded, and the seller gets the money.
Items Provided by Seller
As soon as possible following the opening of escrow, the seller should furnish escrow with numerous items.
1. Escrow instructions signed by all sellers.
2. The latest available tax and assessment bills, and any other statements or bills that are to be prorated through escrow.
3. Seller’s loan payment books and records.
4. Seller’s fire, liability and other insurance policies, if they are to be assigned to the buyer.
5. A beneficiary statement, demand, certificate, or offset statement from the holder of any mortgage or trust deed of record on the property; any items showing the amount due on any loan of record; the payment date; the date to which interest is paid; and other important information. Consent to the transfer from lenders of record must be given.
6. Any subordination or other agreement required by the purchase contract, to be approved by the parties through escrow.
7. Certificates or releases showing satisfaction of mechanic’s liens, security agreements (chattel mortgages), judgments, or mortgages that are to be paid off through escrow.
8. List of tenants’ names and the apartments they occupy, together with the amount of rent paid and unpaid, the dates when rents are due, and, if required, an assignment to the buyer of any unpaid rent, as well as details on advance security deposits, if any.
9. Assignment to buyer of all leases affecting the property.
10. Letters from the seller to tenants instructing them to pay all subsequent rent to the buyer and reaffirming the conditions of the tenancy, including notice of the transfer of the security deposit, if any, to the buyer.
11. The seller’s executed and acknowledged deed of conveyance to the buyer or a valid authority to execute the deed of the seller by the seller’s attorney-in-fact if the seller is acting through an agent.
12. An executed bill of sale covering any personal property to be conveyed to the buyer, together with an inventory of the items for the buyer’s approval.
13. A security agreement (chattel mortgage) for execution by the buyer covering any personal property included in the purchase price but not paid for by the buyer in cash.
14. The deed by which the seller acquired title to the property and the seller’s policy of title insurance.
15. Any unrecorded instruments affecting the title.
16. Any other documents or instruments that the seller is to prepare or deliver.
17. Any approvals required for documents that the seller is to receive at closing.
18. Information required to be disclosed to the buyer under the seller financing disclosure, if necessary.
Items Provided by Buyer
As soon as possible after opening escrow, the buyer should furnish the escrow holder with certain documents and information. The escrow holder should personally review or inspect all of the items.
1. Review of signed escrow instructions by all purchasers.
2. Review the preliminary title report for the subject property to make sure that there are no items of record affecting the property that have not already been approved by the buyer.
3. Review any Conditions, Covenants, and Restrictions affecting the property, whether of record or not.
4. Confirm terms of any mortgages or deeds of trust to be assumed by the buyer, or that will remain an encumbrance on the property.
5. Examine any beneficiary statements, fire insurance or liability policies if they are to be assigned to the buyer.
6. Examine offset statements on loans to be assumed, or those under which the buyer is taking title to the property subject to existing loan terms; verify the unpaid principal balances owed, the interest rates, dates to which interest is paid and other vital information.
7. Review and approve structural pest control and other reports to be delivered through escrow.
8. Carefully review all new loan documents prior to signing.
9. Compare the terms of the purchase contract, escrow instructions, title report, and deed to make sure there are no discrepancies in the transaction documents.
10 If tenancies are involved, review the names, addresses and telephone numbers of tenants, the rent amounts, rent due dates, copies of rent agreements or leases, letters from the seller to the tenants verifying the terms of occupancy and notifying the tenants of change of ownership, the assignments of any unpaid rent and leases, details on security deposits if any.
11. Examine the bill of sale and inventory covering the items of personal property to be conveyed to the purchaser.
12. Review copies of any bills to be prorated in escrow.
13. Verify all amounts and prorations on the estimated escrow settlement sheet.
14. Re-inspect the property to determine that it is in the same condition as it was when the buyer made the purchase offer. Recheck for any undisclosed items that might affect the use of the property, such as party walls, access roads to other properties, irrigation canals or ditches, common drives or persons in occupancy or possession of the property, which the county records would not disclose.
15. Deposit sufficient cash or clear funds to cover any balance owed on the purchase contract plus buyer’s closing costs and expenses, and approvals as required. The parties should always keep copies of any documents and instruments they sign, deliver to, or receive from any party in the real estate transaction.
Items Required For a Valid Escrow
* Binding contract between buyer and seller
* Conditional delivery of transfer documents to a third party
