Booth Escrow Newsletter

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What is a Subescrow & why is it needed in this transaction?

You have a favorite escrow officer and she works at an independant escrow company. She knows you and how you like to do business, you know her and appreciate her ability to organize the transaction and keep all parties informed along the way and this is why you do business with her, right?

Then comes a lender who calls for a Subescrow, right before closing. A subescrow is used when the lender doesn't want to give the loan proceeds to an independant escrow company, but only with the title company that is insuring their lien position.

So your favorite escrow officer (title companies do not actually have licensed escrow officers), sends the title company closer the payoff statements, the signed HUD 1 statement and for a fee, the title company closer accepts the loan proceeds into their subescrow, pays off the loan pursuant to the information provided by your escrow officer, pays their own title fees and then wires the balance to your escrow officer.

Most lenders accept the E&O/Fidelity Bond's that your Escrow Company carries and therefore does not require the Subescrow and your transaction is closed.

Links to past articles

- Here is an article on changes in Condo requirements:
     * FHA Spot Approval Process or
     * New Fidelity Bond Requirements
- Do you want to know when a Trustees Sale  is scheduled?
- Here is an article on Different types of Owners Title Policies

When your buyer purchases with other peoples funds

Whether or not your buyer has a lender involved for financing in the transaction, escrow should obtain Third Party Deposit Escrow Instructions from the party making the deposit, before closing the transaction. Among other things, the instructions allow escrow to use the funds without further concern as to the interest of the depositor and simply use the funds as if they belonged to the buyer.

Julie Booth

Are you working on a real estate transaction and need to run something by an Escrow Officer?

Feel free to call me, I would be happy to discuss your transaction with you!

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29806 5th Avenue SW
Federal Way, WA 98023

P: 206-429-2696
F: 206-429-2580

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