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A Few Words On Title and Escrow (Dont be scared!)

Whether we are working with a first-time buyer or a savvy out-of-state client, there are always questions about what is meant, exactly, by the elusive term escrow, or how escrow works in California. I typically tell clients that they should consider escrow to be the Switzerland of their home buying process.  The escrow folks have no stake in the process and are strictly there as a neutral party that (hopefully) ensures a smooth transaction.

 

Let’s just say that doesn’t always clear everything up. But it does begin to help people understand what we are talking about.

 

The reality is that purchasing a home is a reasonably complex deal, often involving perhaps multiple lenders and title companies and home inspections and governmental bureaucracies (and realtors) all functioning independently and yet together at the same time. Escrow and escrow agents are there to ensure that everybody is getting what they are supposed to be getting at the precise moment that they should be getting it. That’s pretty much the whole deal.

 

When purchasing a home in Santa Barbara, the buyer and seller establish terms and conditions (typically in the accepted offer, aka the purchase agreement) for the transfer of ownership of the subject property.  These terms and conditions are given to a neutral third party—the escrow holder. Thee escrow officer, in turn, has the responsibility of seeing that the terms and conditions settled upon by the buyer and seller are carried out, and takes instruction, generally, from the terms of the purchase agreement itself and any requirements imposed by the lender as a condition of making the loan. The escrow company itself is an independent third party to the transaction—it has no dog in the fight, so to speak—and is really the vehicle by which the interests of all parties to the transaction are protected.

 

In Santa Barbara (indeed, in California generally) it is very standard to have your escrow and title concerns addressed together by a single company, whereas some states have separate companies for each. Title transfer issues are really a part of the escrow process, and are all about the technical examination of the title history pertaining to the property, as well as the preparation of a Preliminary Title Report (PTR) with findings that are issued to the buyer and seller. After preparing the PTR, the title department will determine the required documents needed to complete the transaction and advise the escrow agent and/or the realtors accordingly. Title folks are also responsible for ordering title insurance and making sure that all necessary documents and releases are in place to be able to obtain such a policy (which is key to ensuring free and clear ownership, if that is what the buyer wants). Title insurance is essentially a contract of indemnity which guarantees that the title to the property is as reported, or a warrantee that the buyer is actually getting what it is being promised by the seller in connection with the property being purchased.

 

That’s a lot, I know. But, frankly, it’s important to understand the basics of the purchase transaction before you dive into a real estate deal on, for example, The property broken down below. Happy house hunting, folks!

 

3006 Puesta Del Sol

 

Located in desireable San Roque,

this cute 2 bedroom, 1 bathroom

home features approximately 1,400

square feet of living space and a

large usable lot. The property is in

fair condition and is being sold in a

trustee sale. (Deal alert!)

List price: $549,000

$549,000

Down payment (3.5%): $19,215

$19,215

Loan amount: $529,785

$529,785

Loan payment:  $2,305

(30 yr fixed at 3.25%(3.39% apr))

$2,305

Mortgage insurance: $551 (Required with less than 20% down)

$551

Property taxes estimate: $503

$503

Home insurance estimate: $80

$80

Total Monthly Payment:

$3,439