Q. My Realtor insists on using an escrow to complete the sale on my home, and this loads additional charges that will be deducted from my equity. Since my Realtor is already collecting a fee, shouldn’t he just do the work himself? W.P. Rio Vista
A. Your Realtor can’t handle money; only a Broker can handle money, but an escrow function and Title insurance is an entirely different function than selling real estate.
You may notice at the top of the purchase agreement signed by you and the buyer that the document is titled “California Residential Purchase Agreement and Joint Escrow Instructions”, and is identified as a “Residential Purchase Agreement-California” or RPA-Ca. On page 1, real estate agency is defined, and the price offered for the home. On pages 2&3, there are elective choices allowing flexibility on who pays for (buyer or seller) inspections, reports, repairs, escrow fees, title insurance, HOA transfer, County transfer tax, home warranty, plus a few other items. The basic RPA-Ca is 10 pages, but with attached disclosures it could be over 16 pages.
Once a sale is signed by buyer and seller, escrow is opened and the escrow instructions become the terms and price defined on the RPA-Ca. Nothing in the RPA-Ca can be changed unless both buyer and seller agree in writing.
When moving other people’s money around, you want a neutral 3rd party to execute the RPA-Ca, not someone that could have a conflict of interest.
The escrow company not only assembles and processes all the components of the RPA-Ca including legal documents; they record the transaction with the County and disburse funds according to buyer and seller instructions.
The escrow officer will oversee the buyer signing including any loan documents, and the seller signing for transfer of the deed.
The functions for the Escrow/Title officer are many, including searching the title for liens and encumbrances, pro-rating taxes, and processing the loan documents for the buyer back to the lender for final approval.
About 12 years ago I handled an escrow in my office since I had the listing and a Realtor in our office had the buyer. It was a cash deal and looked to be an easy transfer. It wasn’t. I learned quickly that I didn’t know a lot about Title insurance, or even where the County Recorder’s office was located to record the deed, yet whether or not the deed was filled out correctly.
I ended up paying an Escrow/Title company to finish the mess I started so we could get the deal done!
Escrow companies are monitored by the State, and representatives and not allowed to initiate sales or make changes without instructions from a Realtor or a buyer and seller. Escrow/Title companies are also confined to do business as defined in the Real Estate Settlement and Procedures act (RESPA). They are experts at what they do, and are a very important part of the process.
Send your inquiries to sam@richards-realestate.com or visit: www.richards-realestate.com