All Things Escrow

Ever heard someone say "we're in escrow" and thought...what the heck is escrow? If so, you're not alone. Escrow is an essential part of the home buying process and we're here to tell you all about it.

A Brief History

The word "escrow" come from the french word escroue, meaning scroll. Essentially a checklist to be completed. Escrow is actually not used by every state in the US. It is only common in the western states including but not limited to California, Washington, Oregon, and Arizona.

On the east coast, it is typical for real estate transactions to be handled by attorneys. Why are the two regions of the US different?

A common belief is because the west coast follow Spanish law, while the east coast follows English law. Looking back in time I suppose that would make sense, but we are not confirming it!

Escrow Purpose

Plainly said, Escrow is a nuetral third party that serves as an intermediate between the buyer and seller of real estate.

Most importantly, Escrow is there as an account holder for certain payments associated with the transactions, including the buyers earnest money deposit (often 3% of the purchase price), the down payment if there is a loan, and any prepaid taxes and/or insurance.

It also keeps everyone on a strict timeline and is there to double check all documents and tasks have been completed.

Escrow Fees

Escrow fees can vary between companies and while they are based on the purchase price of the home, it is not a direct percentage of that price. Here are two sample transaction fee breakdowns for a home priced at $500,000 and a home priced at $1,000,000.

As you can see, the escrow fee only increases $300 as the price of the home doubles.

So who pays for the escrow fee? Well, like most things in real estate, it is negotiable. However, in most cases in San Diego, we see the fee split 50/50 and/or both the buyer and seller pay their own escrow fees.

With the market being so competitive, we have seen multiple offers come through in 2021 where the buyer offers to pay for the seller's escrow fees. In a tough seller's market, buyers are trying everything to get the edge on their competition. 

Are you shocked at all the other fees? Feel free to reach out to us for a quick explanation on the fee breakdown for both a buyer and a seller. We would love to be your real estate resource!