Your Guide to Escrow

kbay-home-40What is an escrow?

An escrow is a neutral, independent account created to process a transaction such as a sale or loan.

It protects the interests of all parties involved and favors neither the buyer nor seller. An escrow is created after the Purchase Contract is executed and becomes the depository for all monies, instructions and documents pertaining to the transaction.

Who chooses the escrow company

The determination of the escrow company is decided when negotiating the purchase contract. Usually the seller is the party that chooses the escrow company; however, this can be negotiable between buyer and seller. If escrow is providing a discount to the seller, then the buyer is provided the discount, as well, and vice versa.

Opening an escrow

Either real estate agent may open escrow as soon as the Purchase Contract is executed by placing the initial deposit (earnest money) from the buyer in an escrow account at the Title Company.

Information you need to provide

You will be asked to complete a Statement of Identity for the Title Company. This is a confidential tool used to correctly identify all parties involved in the transaction.

Title companies and escrow officers

Title companies in Hawaii offer escrow services. An escrow officer is employed by the title company to handle the escrow transaction. Your escrow officer is a “neutral third party” and follows instructions based on the written terms of your Purchase Contract and the lender’s requirements for closing. Her/his job is to gather all the documents and information from all involved parties to prepare for the transfer of the property.

Kahaluu-Sunrise-AprilThe escrow officer secures the satisfaction of all requirements of the title commitment. Escrow cannot be completed until all terms and conditions have been met. The buyer and seller should be aware of and willing to help with any portions of this closing process where assistance is needed.

The duties of the escrow officer are as follows:

  • Accept executed contract and issue earnest money receipt
  • Monitor that purchase contract terms and conditions are adhered to by buyer and seller
  • Request a commitment for title insurance (shows requirements for issuance of a title policy)
  • Obtain payoffs to clear title
  • Prorate taxes and insurance upon instruction from the seller and buyer
  • Accept hazard insurance policy, inspection reports, and relevant bills
  • Compute settlement figures
  • Assist the buyer and seller when signing documents
  • Record the appropriate documents with the county recorder
  • Disburse final documents and money on the basis of mutual instructions

Your Appointment

Listed below are the items you need to obtain and bring to your escrow appointment.
Note: Make sure all of your lender’s requirements have been met before your appointment.

  • Identification
    In order to notarize your signature you must bring picture I.D. (current driver’s license, military I.D., or passport)
  • Funds to close escrow
    Wired funds or a cashier’s check made out to the title company (your title company will let you know which) are acceptable methods of payment since out of town and personal checks can cause a delay in the processing. Your escrow officer will tell you the amount you will need to provide.

kapea-flowers-bestClose of Escrow

The escrow officer schedules the closing and recording time and handles all financial and technical details. Signing the loan documents and escrow instructions is not the day of closing. In Hawaii, the purchaser must have their “good funds” in escrow before any document is finalized for delivery to the Bureau of Conveyance two business days prior to recording of the sale. The lender must fund and it will take two days from funding in order to record the sale. The day after the lender deposits funds to. The recordation day is the “Close of Escrow”.

Power of Attorney

If any one of the buyers will not be available to sign the escrow instructions and the loan documents, notify your real estate agent immediately. Your real estate agent will notify your loan broker or bank and the title company. Most banks will accept a power of attorney signature if the document is prepared by the title company. A power of attorney must always be approved by the lender.

Title

The evidence one has of right to possession of land.

Title Insurance Policy

An insurance policy that protects the investment or equity of the buyer, lender or owner in their real property interest.

TYPES OF POLICIES:

It is important for the buyer to know there are two kinds of title insurance.

  • Lender’s title insurance protects the interest of the mortgage lender; this is often referred to as the ALTA Policy. The lender’s policy protects the lender against loss due to unknown title defects at the time of the sale and in the future.
  • Owner’s title insurance protects the equity of the buyer. It assures owners that they are acquiring marketable title. Title insurance is designed to eliminate risk or loss caused by defects in title from the past.

The Preliminary Report

The commitment for title insurance (often called a prelim) indicates all the items or situations that pertain to the subject property. It is a detailed report of findings from a title company search. It sets forth the current status of the property ownership, matters affecting title that will appear as exceptions or exclusions to the policy, and requirements for issuing a policy.

KBay Properties provides a full-service concierge program and will assist with making sure escrow has all the necessary information and documents in order to help you close the sale.