Orange County Escrow Instructions
Posted on February 16, 2013
To the ordinary homebuyer, seller or refinancer “escrow” is that final, but often unknown stage of any real estate or mortgage transaction. Though escrow may seem confusing it begins with clearly defined “instructions” in order that this final stage of the transaction will be done smoothly, efficiently and legally. But, what are escrow instructions?
According to the California Department of Real Estate (“DRE”), “Escrow Instructions…identify all of the terms and conditions of the escrow, as well as the escrow holder’s general provisions and legal responsibilities and limitations.” The escrow officer normally prepares the instructions.
The DRE tells us that the instructions are a tool to help the escrow officer “for every situation” in the escrow process, and are ultimately a legal protection for all the principal parties involved, with special emphasis in protecting the buyer and seller.
Escrow instructions typically identify the escrow holders contact information, license number, along with the escrow number assigned to the transaction. In addition they will include important dates such as the date escrow opened and the date escrow is expected to close. Also included will be the names of the parties in the escrow transaction, the property address and a legal description of the property, with the purchase price and terms.
Other information in the instructions will include how the buyer’s title is to vest, proration adjustments, any matters of record to which the buyer is subject when they acquire title, disbursements to be made, all fees and charges and who is responsible for payment. There will be instructions as to documents to be signed, delivered, or recorded, and a “roadmap” that the escrow holder must follow in handling the escrow.
The DRE says that escrow instructions, “usually reflect the agreements made between the parties with respect to the escrow and the duties of the escrow officer.” These “duties” may include (but are not limited to), ordering a title search, requesting payoff demands and beneficiary
statements. Duties also may include facilitating the receipt and approval of reports, and making prorations and adjustments, the paying of bills, obtaining the buyer or borrower’s signature when needed on any documents.
Other duties include requesting closing funds, authorizing recording and closing the escrow after confirmation of recording, along with preparing final closing statements, disbursing funds and delivering documents to the appropriate parties. As the DRE says, “In sum, escrow instructions indicate all of the specific steps to be completed and conditions that must be satisfied before the escrow is complete.”
The instruction should be clear, specific and avoid all ambiguity, and must accurately reflect the intention of the parties involved. Any changes to the original instructions must be signed off or initialed by all parties who had signed or initialed the original instructions. “When fully executed by all parties, the instructions become an enforceable contract and the escrow becomes effective.”