Published June 20, 2024.
Written by Reno Perry.

Escrow Companies: Why They’re Important and What They Do For You

Navigating the real estate market can be overwhelming, especially with the numerous steps and entities involved in the process. One of the key players in a real estate transaction is the escrow company. But what exactly does an escrow company do, how will it impact you, and do you get to choose your escrow company? Let's dive into these questions and shed light on this crucial aspect of buying or selling a home in Southern California.

1. What is an Escrow Company?

An escrow company acts as a neutral third party that holds funds, documents, and instructions from the buyer, seller, and lender in a real estate transaction. Their primary role is to ensure that all conditions of the sale are met before the property and funds are transferred between the parties involved. Essentially, they safeguard the interests of all parties by managing the financial and legal aspects of the transaction.

Key Responsibilities:

• Holding Funds: The escrow company holds the buyer's earnest money deposit and other funds until the transaction is completed.

• Document Management: They handle all necessary documents, including the deed, title, and mortgage paperwork.

• Disbursement: Once all conditions are met, they disburse the funds to the seller and any other relevant parties, such as lenders and real estate agents.

• Compliance: Ensuring that all legal requirements and conditions of the sale are fulfilled.

2. How Will It Impact Me?

The escrow company plays a vital role in providing a smooth and secure transaction. Here’s how their involvement impacts you:

For Buyers:

• Security: Your funds are securely held and only released when all conditions are met.

• Transparency: They provide a detailed breakdown of costs and fees associated with the transaction.

• Peace of Mind: Knowing that a neutral third party is managing the process can reduce stress and potential conflicts.

For Sellers:

• Assurance: Makes sure that the buyer's funds are available and legitimate.

• Smooth Process: Helps coordinate the closing process, verifying that all documents and funds are correctly handled.

• Compliance: Guarantees that all legal requirements are met before the sale is finalized.

3. Do I Get to Choose My Escrow Company?

The choice of the escrow company is typically determined by the listing agent in Southern California. However, it's important to understand your rights and options:

Buyers:

• Limited Choice: As a buyer, you generally do not get to choose the escrow company. This decision is made by the listing agent representing the seller.

• Verification: You can inquire about the escrow company’s fees and governance. Ask about their regulation, years in business, and check for reviews or referrals.

Sellers:

• Selection: As a seller, most of the time your real estate agent will already have a trusted escrow company, but you do have the option to request a different one. Usually, your real estate agent will have worked with this company in the past — practicing real estate agents will have a wealth of knowledge on what makes an escrow company legitimate and preferable over a competitor.

• Questions you can ask your REALTOR®:

  • What are the escrow company’s fees?

  • Have you worked with this escrow company in the past?

  • How long have they been in business?

  • Can the escrow company provide referrals or testimonials?

Why Buying is Always a Better Investment in Southern California

Southern California's real estate market has consistently shown long-term growth, making it a reliable investment. Property values in California historically increase due to several factors:

Market Trends:

• Demand: High demand for housing in desirable areas like Los Angeles, San Diego, and Orange County drives property values up.

• Economic Strength: A robust economy with diverse industries supports property value growth.

• Limited Supply: Limited availability of land for new construction keeps housing supply low, contributing to higher property prices.

Data-Driven Insights:

According to Zillow, home values in California have seen an average annual increase of around 5.6% over the past decade. Investing in property here not only provides a place to live but also offers substantial equity growth over time .

Conclusion

Understanding the role of an escrow company is essential in the real estate transaction process. While buyers may not have the choice of selecting the escrow company, they can still ensure transparency and security by asking the right questions. Sellers, on the other hand, can take charge by choosing a reputable escrow company to handle their transaction.

Investing in Southern California real estate is a smart move, given the region's consistent property value growth. Whether you're a first-time homebuyer, an investor, or selling your home, working with experienced professionals ensures a smooth and successful transaction.

Our team has been in the Southern California real estate market for over 46 years! Contact us to learn more and find the right agent that fits your needs.