The 10 Steps for your Lake Tahoe Escrow Transaction

homes for sale in lake tahoeYour offer has been made and accepted.  What is the next step? It is now in “escrow.”  What does this mean?  Since the transaction of a home purchase normally involves a large amount of money, a third party (normally a title & escrow company) handles the transfer of the funds and documents from one party to another. This third party takes custody of the bond, deed and other pertinent documents until specified conditions are met.

The California Escrow process has 10 steps

1.   Prepare Escrow Instructions

The Escrow Holder (title company, bank or other parties) creates forms for the buyer and seller to sign. These forms are created so all parties understand the transaction.  An initial deposit is normally required at this stage.  These forms (instructions) must contain: purchase price and terms; agreement as to mortgages; how the buyer’s title is to appear (vesting)’; matters of record subject to which buyer is to acquire title;  inspection reports to be entered into escrow;  pro-ration adjustments (taxes and insurance); date of buyer’s possession of the property; documents to be signed by the parties, delivered into escrow and recorded; disbursements to be made, costs and charges and who pays for them; date of closing.

2.   Order Title Search

A title search is performed on the property which results in a preliminary title report from the title company. The escrow holder examines the report and the buyer should approve to make sure there aren’t any unreported additional liens.  If there are other liens the lien holder must clear it up before the buyer can move forward.

3.   Request Demands and/or Beneficiary Statements

If money is still owed by the sellers on the property the lenders get one of the following:  a demand for a payoff if the seller’s loan is to be paid in full through escrow or a beneficiary statement if the buyer is purchasing the property’s existing loan (assuming a loan).

4.   Accept Structural Pest Control Report and Other Reports

These reports can be a home inspection, termite report, plumbing or roofing reports and any reports that will attest to a property’s condition.   Depending on what is found in the reports the buyer will need to determine the course of action before the close of escrow (termite treatments,  requested items fixed or establish credit, or sold as is).

5.   Accept New Loan Instructions and Documents

If the buyer is getting new financing the escrow holder gets the buyer’s approval or execution of the documents. The escrow agent must also satisfy all of the lender’s instructions before using the funds to complete the transaction.

6.   Accept Fire Insurance Policies and Complete Settlement

You’re getting close to closing escrow at this point.  Following the buyer’s and seller’s instructions the escrow holder will:

  • accept and deliver any fire insurance policy and transfer the insurance
  • make all payments on property taxes and insurance
  • complete the accounting details
  • inform the principals that escrow is ready to proceed

7.   Request Closing Funds

The escrow holder cannot disburse any funds until all items such as checks or drafts have cleared the bank and are ready to be withdrawn.

8.   Audit File in Preparation for Closing

The escrow holder accounts for all funds and documents and determines that the buyer and seller have complied with all of the escrow instructions.

9.   Order Recording

The escrow holder authorizes the title company to run the seller’s title and to record the necessary documents.

10. Close Escrow

The deal is closed!  The escrow holder prepares the settlement statements for the buyer and seller approval disburses all of the funds and delivers documents to the party or parties involved.

The buying and selling of a Lake Tahoe home

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