Title and Escrow Services
In Marin County, title companies handle title and escrow services needed for buying a home. The company, chosen by the buyer, provides two essential services:
- Escrow: Escrow is a service which manages the funds and documents involved in a property transaction. An escrow company is licensed and regulated by the State of California. Escrow begins when a seller accepts an offer and ends when the escrow conditions are met.
- Title: A title company issues insurance which guarantees the buyer and the buyer’s lender against losses from any defects in the ownership of the property that may be found in the public records at the time the buyer purchases the property.
Madeline Schaider recommends title and escrow companies with whom we have reliable, working relationships.
The Escrow Process
In the escrow process, the buyer and seller in a real estate transaction deposit funds, documents, and other objects of value with a neutral third party, known as the escrow holder. Escrow ensures that funds will be released or legal documents will be recorded only when the conditions of the sale are completed.
Escrow usually begins (opens) when the signed and approved real estate purchase agreement is delivered to the escrow company, usually with a deposit or down payment. The escrow agent prepares escrow instructions for the parties’ signatures; these give the escrow holder the authority to act and indicate all specific steps to be completed and conditions that must be satisfied before the escrow is complete.
Escrow instructions include:
- Purchase price and terms.
- How the buyer’s title to the property is to be recorded; for example, tenants in common with right of survivorship.
- Adjustments to expenses such as taxes and homeowners’ association dues so that each party is paying only for those days during which each owns the property.
- Matters of record to which the buyer is subject when acquiring title.
- Disbursements to the sellers, banks, etc. at the close of escrow.
- Charges associated with the closing and who is responsible for payment.
- Signing of documents that are delivered to the parties and recorded at the end of escrow.
- The process that must be followed.
Once all conditions in the escrow instructions have been satisfied, the escrow ends (closes). The lender and buyer wire funds to escrow so the seller and the seller’s lender can be paid. The escrow holder releases the funds and documents it is holding, pays authorized bills, prepares and delivers a final closing statement to the parties, and prepares and sends a new deed to the county recorder, all in accordance with the escrow instructions.
The Title Insurance and the Title Process
Title insurance protects against losses that occur when defects are discovered in the history of ownership of a property that were unknown when the title policy was issued. Here is a list of common defects in the title to a property. Title insurance also guarantees loan priority, the order in which the lenders are repaid when the property is sold.
In California, there are two types of title insurance policies:
- Optional but routinely purchased by buyers: The CLTA (California Land Title Association) policy insures the buyer. This policy remains active until the property is sold.
- Required if you obtain a loan on your home: The ALTA (American Land Title Association) is an extended coverage policy that insures the lender against possible unrecorded risks excluded in the CLTA policy. The ALTA lender’s policy remains in place until the loan is paid off.
Before issuing a title insurance policy, a title company checks for defects in the title by examining a database of property information and public records including deeds, mortgages, wills, divorce decrees, court judgments, tax records, liens, encumbrances, bail bonds, property maps, and easements. The title search determines who owns the property, what outstanding debts are recorded against it, and the condition of the title. The buyer receives the results of this search, known as a preliminary title report.
The policy defines what risks are covered and what risks are excluded from coverage. The title insurer will reimburse the buyer or lender for losses that are covered, up to the face amount of the policy, and any related legal expenses. You may also purchase optional endorsements to cover risks that are not included in the standard title insurance policy.