Jay’s note: I’m quite excited to introduce Bill Risser as a semi-regular contributor to Phoenix Real Estate Guy! Bill is a “Title Guy” – he’s an Assistant Vice President and Branch Manager at Chicago Title Insurance in Gilbert, AZ. There aren’t a whole lot of title folks in the real estate blogiverse and I think he’ll provide some great insight into what is often one of the more mysterious aspects of buying and selling real estate. Welcome Bill!
Your agent calls to tell you the seller has accepted your offer on your dream home. The contract and your earnest money check have been delivered to the title company and escrow has been opened. What does that mean? What happens from the opening of escrow to the moment you get the keys to your new home?
Escrow is defined as money, property, a deed, or a bond put into the custody of a third party for delivery to a grantee only after the fulfillment of the conditions specified. Huh?? Translation – In Real Estate, Escrow acts as a neutral third party and holds funds from the buyer, secures a deed from the seller, and when all the terms of the contract have been met, transfers the deed to the buyer and releases funds to the seller. Still a bit wordy, but that’s basically the story.
There are many more actions performed by the title company during the escrow process (in Arizona, title and escrow functions are combined into one office, managed by an Escrow Officer). These tasks include but are not limited to: (had to throw in a disclaimer, it’s in my escrow nature)
- Review purchase contract
- Obtain Title Commitment and review for issues (we’ll discuss in a future post)
- Processing and tracking documents and funds
- Communicating with all parties with weekly updates
- Meeting requirements of lender
- Work with seller to obtain proper payoff information for liens against property
- Conduct loan document signing with buyer
- Obtain seller signature on deed and other documents as necessary
- Recordation of all appropriate documents
- Securing and disbursing funds as instructed
While the title company is doing all of the above, the buyer, with the help of their agent, obtains a termite report, has a home inspection performed, and reviews the title commitment and CC&R’s (we’ll cover these documents in another post). Most importantly, the buyer must provide their lender with all required information so loan documents can be delivered on time to the title company.
All of the fun begins when the buyer’s loan documents get to the Escrow Officer. 90% of the activity in a typical escrow happens in the last couple days. Using instructions supplied by the lender as part of the loan documents, an audit of the transaction (typically called a pre-audit) is prepared by the Escrow Officer and sent for approval to the lender and both agents. The pre-audit details every charge and credit to both buyer and seller. After approval of the audit, buyer and seller are scheduled for signings. After the buyer signs the loan documents, they are processed and returned to the lender for funding. Finally, after the Escrow Officer receives the lender’s funds, the file is recorded and the escrow is complete. Keys can now be handed over to the new owner, and proceeds disbursed to the seller.
Most residential purchase escrows are routine, and follow the outline above. Every now and then, things can get, well, interesting. Just recently, we suspected fraud in the signing of a deed provided to us. The seller was in prison, and his “signature” was not even close to others found in the public record. The deed was notarized, but we were not comfortable insuring the transaction. The buyer really wanted the house, so in order to close, I made a little trip to the state prison in Marana to visit the seller. The prison officials were very helpful and I was able to obtain a valid deed, and the buyer got their new home.
If you have any specific questions about the escrow process in Arizona, leave a comment and I’d be happy to respond.
About the Author: Bill Risser is an Assistant Vice President and Branch Manager of the Chicago Title – Gilbert office. You can find him at ChicagoTitle-Gilbert.com and on Twitter at @billrisser, that is, when he’s not on a local golf course with his son, at the movies with his wife, or tending to one of his four fantasy leagues (NFL, MLB, PGA, and NASCAR).