RELATIONSHIP OF THE REAL ESTATE BROKER AND THE ESCROW HOLDER/AGENT

RELATIONSHIP OF THE REAL ESTATE BROKER AND THE ESCROW HOLDER/AGENT

A real estate broker should consult the escrow holder/agent before informing the principals that escrow will
close on a certain date. An escrow includes a myriad of details, any of which could cause delay. Submission of
accurate instructions, instruments, and documents will expedite closing. Some suggestions:

1. As far as possible, make certain that the deposit receipt (residential purchase agreement/contract and the
escrow instructions) reflect the understandings and the intentions of the principals.

2. When opening escrow, a copy of the recorded grant deed (instrument of conveyance) conveying title of
the subject property to the seller, or a copy of a deed of trust (instrument of encumbrance) encumbering the
title to the subject property, or a copy of the seller’s title insurance policy should be provided to the escrow
holder. Such instruments and documents should establish the correct legal description and the manner in
which seller holds title to the property.

3. Remember that escrow instructions and amended instructions must be in writing. If the buyers are planning
to be away, the real estate broker should check with the escrow holder/agent (the authorized representative
of the escrow holder) before the buyers leave to determine if their absence will in any way hold up closing
of escrow. Without instruction from the buyers as a principal to the escrow, the real estate broker cannot
offer to put up money due from the buyers or instruct the escrow officer to deduct the amount owing by
the buyers from the real estate broker’s commission. The buyers may be deliberately withholding the

deposit of closing funds until the seller performs some condition precedent known only to the principals.
Except pursuant to the instructions of the buyers, accepting the funds required of the buyers from any one
other than buyers may cause an escrow to close against the understandings and intentions of the principals
of the escrow.

4. Furnish the escrow officer (representative of the escrow holder) with the correct spelling of the principals’
names, addresses, and telephone numbers. Business and cell phone numbers should be included. Some
escrow holders would appreciate being told of the email addresses of the principals to the escrow.

5. Be sure the escrow officer (representative of the escrow holder) knows how the buyers want to take title.
Real estate brokers, salespersons, or escrow officers, should not assist with this decision, as it may involve
legal and tax consequences. Independent professional advice is required.

6. Give escrow holders/agents the names and addresses of the existing lender(s) and/or loan servicing agents
and the applicable loan numbers. Many existing lender(s), and FHA, require a 30-day advance payoff
notice or the sellers may be subject to additional charges on any loan payoff.

7. Check with the sellers regarding bonds or other liens on the subject property. Those not being assumed
may be paid during the escrow.

8. Notify the escrow officer (representative of the escrow holder) when the loan commitment required by the
buyers has been received, i.e., the loan terms have been “locked” and/or an approval letter has been issued
by the intended lender(s). The approval letter must come from the lender(s) and not from a mortgage
broker. A copy of the approval letter (if any) should be provided to the escrow holder.

9. Determine how fire insurance coverage is to be handled. The buyers may want to do business with their
insurance agent or with a certain insurance company. The sellers’ insurance policy may include other
property and the sellers may not want the coverage transferred to the buyers.

10. Be aware of the escrow holder’s/agent’s time requirement relating to non-cash deposit of funds. Checks
must clear and the funds must be available as an automatic right before the escrow holder/agent can make
disbursements.

11. The principals of the escrow (buyers and sellers) should meet with the escrow officer when executing the
escrow instructions. It is the responsibility of the escrow officer (as the authorized representative of the
escrow holder) to explain and to provide copies of the escrow instructions to the principals and to carry out
what instructions may be required by the lender(s) when “purchase money” financing is a necessary part of
the transaction.