An escrow agreement is used to protect the seller and buyer in a purchase transaction. An escrow agent is responsible for ensuring that funds and property are exchanged according to agreed terms. The main purpose of an escrow agreement is to protect both sides’ interests and ensure that they receive what they contracted for without delays or disputes.
What’s theEscrow process?
Escrow is a third party process that requires payment to an independent entity or person that acts as the “escrow agents”. The agent is responsible to hold the property and funds until a specific condition is met. If everything goes smoothly, the funds or property will be turned over to either one of the parties. The Escrow can be returned to the payer if the contract is not completed.
What Are the Two Types Of Escrow Processes In California?
Two types of instructions are used in escrow agreements:
Bilateral Escrow
Bilateral escrow allows each party to a transaction to have equal rights to request that the escrow agent hold the funds or property during the transaction.
Unilateral Escrow
Unilateral escrow refers to an arrangement where only one party can ask that the escrow agent keep the property and funds.
3 Requirements for a Valid Escrow
Let’s now discuss the three essential requirements that an escrow certificate must meet.
1. The Contract between Grantor and Grantee
No matter if the agreement is written or verbal, it must clearly state that Escrow is involved. Both parties must agree to Escrow terms.
2. Delivery of the Deposited Item at a Depositary
An arrangement must be signed by the grantor.
3. Notification to the Depositary of the Agreed Terms
It is important that the terms of Escrow are communicated to the agent in order to be able to understand the conditions before they hand over the property to any party.
What is the average time it takes for business escrow to take?
Business escrow typically takes between 4-8 weeks to complete. This time period can vary depending on many factors such as the complexity of the transaction or the involvement of regulatory agencies. The Escrow agent can give you a better idea of the Escrow’s length.
The following factors can also lead to delays:
* Property not available due to legal proceedings that have arisen after the transaction.
* Refusal of the other party to fulfill his or her obligations under contract.
* Changes to be made that will allow for agreement on terms.
* California’s Escrow Law is not familiar to all.
* Incomplete records of transactions that were made before escrow was established.
If a thorough background check is done on all parties, delays can be avoided.
Who handles Escrow in California
California’s Escrow Officer or Escrow Agent handles the escrow agreement. This individual will act as your agent in the escrow process and will track the transfer of funds, property, and any other important information.
California’s Department of Business Oversight (DBO) is responsible for licensing escrow agents. DBO makes sure that Escrow agents are well-informed about Escrow in all areas and is knowledgeable in applicable business laws.
Who owns the money in an Escrow account?
The escrow agent is responsible for handling escrows. They are the “owner” and the “owner” the funds and property. The funds are owned by one of the parties to the contract. One party is referred to as a “grantor” if they deposit money into an escrow account. The other party is referred to as a “grantee”.
When a grantor deposits funds into an escrow account, he or she gives up control of the funds. Before executing an escrow, grantors and grantees need to be familiar with how it works.
What does an Escrow Agent do?
An escrow agent licensed by the state is a neutral party that acts as the custodian for funds or property in a business transaction. Following the instructions of both the agent and the parties, Escrow will handle the payment and transfer funds and property.
Legally, Escrow agents must follow specific procedures in order to transfer funds and property between buyers and sellers quickly.
California must license escrow agents. They must also adhere to certain professional policies and ethical standards.
The escrow agent must:
1. To keep the property or funds in an escrow account until a specified date.
2. Keep records of all transactions as well as the condition of any property or funds.
3. To ensure that each party to an agreement pays all taxes on money received through a transaction managed by an escrow agent.
4. To pay any money due to either party at Escrow’s end, unless stated otherwise in the agreement between them, in accordance California’s Escrow law.
5. For certain transactions, it is important to inform regulatory agencies of any significant information regarding certain assets or properties in order to take appropriate action.
Summarized from an article by Stone & Sallus LLP.
