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For Sale By Owner Escrow: Essentials for a Smooth Closing - American Trust Escrow
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for sale by owner escrow

For Sale By Owner Escrow: Essentials for a Smooth Closing

To open escrow, the “terms of sale” will need to be negotiated and supplied directly from the buyer and seller before the escrow instructions are prepared for signing. As a neutral third-party, escrow holder ensures the conditions of the contract are met before title is transferred. A valid contract is essential to escrow.

A valid contract: 

  1. Capable Parties
  2. Mutual Consent
  3. Lawful Purpose
  4. Sufficient Consideration
  5. Must be in writing

Tip: It recommended that the buyer and seller meet and settle on their terms (purchase price, closing date, who is responsible for government-required disclosures and reports and for closing costs, etc.) before making an appointment to open escrow.

What Will Escrow Require in a “For Sale By Owner” Transaction?

Open Escrow Checklist:

In order to provide clear instructions to the escrow holder, include the following in the purchase agreement:

  • Full legal names of parties and contact information.
  • California Property Address
  • Purchase Price
  • Close Date
  • Initial Deposit
  • Loan Amount and lender contact information
  • Any Contingencies
  • Who will pay for the government required point of sale work and reports?
  • Disposition of Government Required Disclosures
  • Will there be termite inspection and work, and who will pay for it?
  • Statements for any underlying encumbrances, including playoffs, Homeowner’s Association, solar, water stock and leases,
  • Name of the title company and allocation of all escrow and title closing costs. 

 

Duties that the Escrow Holder Will Perform: 

  • Prepare escrow instructions and conveyance documents.
  • Order preliminary title report from Title Company
  • Order any payoff statements on any deed(s) of trust(s) or other liens of record that will be paid from the seller’s proceeds at the close of escrow
  • Collaborate with buyer lender through the entire escrow, including handling of loan documents.
  • Prepare estimated and final closing statements for parties’ signature. Prepare the Seller’s Closing Disclosure.
  • Assist sellers in preparing the property to be delivered to buy with an insurable clear title.
  • Collaborate with title insurance companies on the recording of final documents.
  • After documents have been recorded and escrow has received in writing all recording and payoff charges from the Title Company, escrow will then balance the file and disburse the seller’s proceeds and buyer’s refund check, and any other required disbursements. Final closing packages are prepared and sent to parties.

 

In a “For Sale By Owner” transaction, the Escrow Officer is the central point of contact for all items that are outlined and required in the written Agreement and Escrow Instructions. Buyer and seller are responsible for the timely performance of all duties required to ensure a timely closing.

This includes buyer’s collaboration with their lender to ensure timely delivery of loan documents and seller’s completion and disclosure of all required documents. Time is of the essence!

The time-sensitive nature of a real estate transaction does not change in a “For Sale By Owner” situation, so it is important to be mindful and stay on top of the documentation that is required by the escrow office. This is especially important at the beginning when the Escrow Officer is requesting information to open escrow.


If you have any questions or if we can assist you with an escrow, please don’t hesitate to reach out. We are here to help!