How To Open an Escrow Account
June 14th, 2022
Are you wondering how to open an escrow account for a real estate transaction? Don’t worry, it’s not much harder than opening a regular bank account. This article will explain the 3 steps that are necessary for opening an escrow account, list the information you will need, give a few tips regarding what you should look out for, and answer a few commonly asked questions.
So let’s get to it.
The Information Your Escrow Officer Will Ask For
To successfully open an escrow account, you’ll need to provide your escrow agent with some information first. While each individual escrow company may not ask for the exact same info and documents, this is what is generally required:
- Property address
- Property type and description
- Names and contact information of the parties involved
- Name and contact information of the HOA (if any exists)
- The sale price
- The purchase agreement and any addendums
With these in hand, you are ready (or someone is ready on your behalf) to open an escrow account.
Open Escrow in 3 Steps
Make an Agreement and Gather the Information Necessary
You cannot open an escrow account before you have made a purchase agreement. Regardless if you are the buyer or seller, you need to agree on the price and the terms and conditions of the sale and put it down on paper with the necessary validation.
Once you have a purchase agreement, you need to gather the rest of the information that is listed above. Then, it’s on to step 2.
Choose an Escrow Company
Think of opening an escrow like opening a bank account. However, the escrow account will be used to facilitate the (probably) largest transaction of your life. You wouldn’t open an account with the first bank you see, right? The same applies to choosing an escrow company, but it’s even more important.
Professional escrow services can help you navigate real estate transactions as painlessly as possible. On the other hand, if an escrow agent doesn’t handle the escrow process correctly, it will delay the deal and possibly rack up unnecessary costs. So look at the services you will get, the company’s track record, give them a call and check out the prices, etc.
Opening the Account
Once you’ve chosen your escrow company and have the necessary information on hand, you can open your account. The escrow agent will ask for the fully executed purchase agreement, open your account, and assign you an escrow number. The earnest money deposit from the buyer can be delivered at the same time as the purchase agreement, but it is not obligatory in all cases.
How To Open an Escrow Account Summarized
So, how to open an escrow account? In short, the three steps to the escrow process are:
1. Make a purchase agreement and acquire the necessary information.
2. Carefully select an escrow company.
3. Deliver the purchase agreement and open your account.
Two Additional Pieces of Advice
Take Care of Your Escrow Number
Take care of your escrow number. Write it down, keep it in a safe place, or do whatever you need to do so you don’t forget and/or lose it. You will reference the escrow number any time you want to ask your assigned escrow officer any questions regarding the state of your transaction (and since real estate transactions can take a bit of time, you’ll more than likely wish to contact your escrow officer multiple times).
Choose an Independent, Third-Party Service
Real estate and mortgage brokers or banks may operate their own escrow departments. However, these departments are not held to the same standards as independent escrow companies.
Third-party escrow companies in California are licensed and overseen by the Department of Financial Protection & Innovation. They need to follow strict regulations that were made with consumer protection in mind.
Thus, choose a third-party company to handle your escrow to get the best service.
But who chooses the company? The buyer and seller need to agree and choose the company that will handle the escrow.
Who Opens the Account and How Can It Be Done?
Finally, let’s deal with whose responsibility it is to open an escrow account and how it can be done.
1. It’s common practice that the seller’s real estate agent opens the escrow account. However, any party involved in the transaction may open the account.
2. Many escrow companies let you open an account via phone, mail, or in person.
Are You Looking to Open an Escrow Account?
Lightspeed Escrow can help you. We are an independent escrow company founded by real estate professionals to expedite transactions and minimize costs. Our mission is to make your real estate transactions go seamlessly and avoid unnecessary complications.
If you have any questions regarding the escrow process or need professional escrow services, contact Lightspeed Escrow.