Have An Accepted Offer, Time To Open Escrow
Posted by Yvonne Hefner on Apr 1, 2003 - 11:28:00 PM
LOS ANGELES—During the month of March, in Canyon News territory, approximately 268 single-family homes were listed for sale and approximately 1,000 closed escrow. Also, during this time period there were approximately 97 properties listed for lease with approximately 470 properties leased. Continuing low rates will keep the housing industry busy this year and indications are good that home sales may set yet another record in 2003 assuming the war in Iraq is not prolonged. Mortgage loan applications for purchases and refinancing for the week ending March 14 increased to a record high. The percentage of households in California able to afford a median priced home decreased by another two percentage points in January compared to a year ago. The minimum household income needed to purchase a median priced home at $336,740 in California in January was $79,820 based on a 20 percent down payment. The minimum household income needed to purchase a median priced home was up from $73,650 in January 2002 when the median price of a home was $287,080. Even with this increase, the winter of 2003 was so bad, 61 percent of people living in the Upper Midwest and northeastern U.S. say they may escape for a warm weather home. California was second choice with Florida being first. The brutal winter of 2003 could be the decision maker for those considering the purchase of a second home or new primary residence.
Photo by Kibiwot Limo
Once a home has been selected and the offer has been accepted, escrow is opened. Escrow is the processing of the paperwork and money involved in a sale or other real estate transaction. The purpose of the escrow is to meet the terms of the contract. An escrow is created when a new written agreement instructs a neutral third party to hold funds and only proceed when all the agreed to conditions have been performed. In California, an escrow is usually a requirement for the sale of a home or any other real estate. An escrow may be initiated with a written contract such as a deposit receipt or through oral instructions. However, it is important to have agreed upon the written instructions drawn by the escrow company. A diligent and concerned Real Estate Agent as well as the escrow will explain each step of the process to a buyer or seller. The three requirements for a valid escrow are as follows: 1) Signed escrow instructions, forming a binding contract between the buyer and seller. California Purchase Agreements are also Joint Escrow Instructions; 2) A neutral party, which is the escrow company, acting as a dual agent of the buyer and seller; 3) Conditional delivery of funds and documents when all the conditions in the escrow are met.
An escrow officer while not licensed by the state, is an employee of a licensed escrow company that acts as the agent. An independent escrow corporation must be licensed by the Department of Corporations to handle escrows. The escrow agent is authorized to call for the buyer's documents and funds. In Southern California, escrow instructions reflecting terms of the Purchase Agreement are reproduced and signed by the buyer and seller after the start of escrow. Escrow service fees in Southern California are usually split 50-50 between buyer and seller. Once the escrow instructions have been drawn from the original contract and signed by each party, neither party may change the escrow instructions without the agreement of the other. If both parties mutually agree to change the instructions, the change can be put into effect at any time. However, if a dispute should arise, the escrow company will not proceed until both parties come to terms. If the parties cannot agree to terms, an escrow company will settle a dispute by bringing an interpleader action to determine where the money or consideration goes. Escrow amendments must be signed by the parties to change the escrow. If the seller thinks he or she can obtain more money and wants to rescind an escrow, keep in mind; the seller cannot rescind an escrow without the consent of the buyer.
Selection of an escrow company and an escrow officer are part of the negotiation between buyer and seller. Either one of the parties may choose the escrow company which should be explained to buyer and seller. If the buyer and seller each desire a different escrow company, then the Real Estate Agent must work for a mutual agreement before there can be an offer and acceptance of the sale. Next month, I will discuss more about escrow including the sequence of events in an escrow. Until next time, home matters.
Yvonne Hefner, a licensed Real Estate Agent, can be reached at 323-650-8812 or at email@example.com
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