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You are here: Home / Realty / Residential / Sellers / Required Documentation and Funds for Escrow

Required Documentation and Funds for Escrow

Escrow
October 15, 2020 by Kasia Harmata Leave a Comment

Although escrow is an inevitable part of any financed home sale, most people are unfamiliar with the process prior to going through it for the first time. Obviously, it behooves you to fully understand all portions of the sales process prior to jumping in with both feet. Let’s start by summarizing what escrow is.

An escrow is a neutral location in which to store documentation and funds related to the purchase/sale of real estate. The escrow officer—which in California is the title company—acts as the arbiter of this account. They serve as both an unbiased third party enforcing the rules of the process, and to coordinate the mountain of documentation and actions needed to close out the sale.

The ultimate desired outcome of the escrow process is threefold:

  • the entire escrow process goes smoothly and securely
  • home seller gets a check in-hand for the sale of their home
  • home buyer gets the keys and deed to their new home

In order for an escrow process to accomplish the above three goals, there needs to be successful coordination between the escrow officer, buyer’s mortgage broker, and both the buyer’s and seller’s agents.

The Seller’s Opening Document Package

While each escrow process is unique, there are certain rules of thumb when it comes to documentation and funding requirements. When the process first starts, both home buyer and seller will receive an escrow opening package. As the seller, you’ll want to complete your package quickly to keep the escrow process as short as possible.

Being as communicative as possible with your agent and escrow officer will be key to ensuring that there are no surprises or mistakes during escrow. For example, if the home sale will be part of a 1031 exchange, or if you’ll be out of town and will require power of attorney to sign documents, you’ll want to let them know this right away so they can plan accordingly.

Documents and forms that will likely make up your opening package include the following:

Escrow Holder Acknowledgement

This is essentially the agreement between you and the title company. It acknowledges that the title company agrees to act as the escrow agent during the sale of your home.

Grant Deed

This is the document that specifies the transfer of title to your home upon the closing of escrow. You’ll need to have your signature notarized on this document.

Statement of Information

This is a document between you and the title company. The purpose is to provide information that assists them with clearing any judgements and/or liens during the transfer of title.

1099-S Input Form

IRS Form 1099-S is used to report the proceeds from the sale or exchange of real estate and certain royalty payments. This input form is used to produce the resulting Form 1099-S.

CA Real Estate Withholding Forms 593, 593-C and 593-E

California requires non-residents to withhold a certain amount of money for taxes. These forms will determine if you’ll be subject to this withholding requirement.

Property Information Statement

This statement provides information to the escrow officer on your homeowner association and existing loans on your property, if applicable.

Affidavit of Non-Foreign Status

Similar to the CA 593 forms, non-US residents are subject to federal tax withholding when selling real estate within the US. By signing this document, you certify that you’re a US resident and that the withholding requirements do not apply.

Other Required Documentation and Earnest Money

In addition to completing the opening package, you’ll need to provide the following documentation as well, if applicable.

Homeowner Association (HOA) Documents

If your home is part of an HOA, it’s important that the buyer is provided with the full package of documents for review and approval. The more quickly these documents are provided, the better. Title companies will typically assist with providing these documents. You can help them by providing complete HOA and management company contact information. It’s still a good idea to be prepared to provide the documents yourself if needed.

Seller Disclosures

Seller disclosures provide the buyer with information on any issues with the property that the seller is aware of, prior to completing the sale. This is required by law, and we encourage our clients to be as forthright as possible. At the end of the day, the buyer inspection will reveal any issues anyway. Thus, not being upfront about issues provides no benefit to you.

Disclosures include documents such as the transfer disclosure statement, natural hazard disclosures, termite and pest reports, city property inspection reports and any other inspection reports you may have ordered.

Earnest Money

Earnest money is a deposit paid into the escrow account by the buyer. It acts as proof that the buyer is serious about moving forward with the purchasing process. Typically, these funds are non-refundable unless a contingency is triggered, such as a low appraisal value. Any other terms that allow for earnest money to be refunded would need to be specified and agreed upon in the purchase contract.

If you have any questions about navigating the escrow process, please let me know in the comments. You can also contact us if you’d like to discuss specifics of listing your home in more detail.

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Filed Under: Sellers Tagged With: Escrow, Home Selling, Residential Real Estate, Seller Success

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About Kasia Harmata

Kasia’s background in real estate began almost at birth. Her father immigrated to the US from Poland before she was born and built a real estate Development in Chicago from the ground up, which he is still actively involved in to this day. Kasia spent many years helping manage her father’s development projects, from multi-unit greystones in downtown Bronzeville to single-family home flips in the suburbs, and even international projects back in Poland, including a 15-bedroom hotel in Bukowina Tatrzańska that launched its business in 2017. As a licensed real estate agent in both Illinois and California, Kasia has amassed years of experience working in a wide variety of residential and commercial environments, including managing cannabis real estate acquisition for Shryne Group’s ever-expanding retail footprint.

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  • Choosing Whether to Rent vs Buy Your Home
  • Move Out Date Considerations
  • Closing Escrow and Transferring Home Ownership
  • How to Prepare for a Home Appraisal and Buyer Inspection
  • Required Documentation and Funds for Escrow

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Buying and selling, simplified.

We believe real estate transactions are about more than just completing the sale at all costs. A great experience leaves both the seller and the buyer feeling confident that they made the right choice. For sellers, it's all about providing pre, during and post-sale support to help close sales quickly and for the desired sales price. For buyers, we look at the unique needs and desires of our clients to find the best properties available, and to help them close within the desired price range.

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