Do I need to open escrow to purchase a house from a relative?

[Biscuits&Gravy]

What is the name of your state (only U.S. law)? CA

A family member has a property I want to purchase for in cash. The property is free and clear, no liens, etc. I would be purchasing it for 40k and I was wondering if I need to open escrow to complete the sale. I know in the change of ownership form it asks for the type of sale, purchase price, property type, etc. This with some other notarized documents is all that is really needed at the recorders office to make the transfer official. So do I really need to open escrow to purchase the property?

 

[LdiJ]

What is the name of your state (only U.S. law)? CA

A family member has a property I want to purchase for in cash. The property is free and clear, no liens, etc. I would be purchasing it for 40k and I was wondering if I need to open escrow to complete the sale. I know in the change of ownership form it asks for the type of sale, purchase price, property type, etc. This with some other notarized documents is all that is really needed at the recorders office to make the transfer official. So do I really need to open escrow to purchase the property?

No, you shouldn't need to do that, however what you should probably do is make sure that the sale goes through a title company or real estate attorney, whichever is most appropriate for CA. That would avoid potential errors that would make it difficult down the road to establish a clear title.

 

[Biscuits&Gravy]

No, you shouldn't need to do that, however what you should probably do is make sure that the sale goes through a title company or real estate attorney, whichever is most appropriate for CA. That would avoid potential errors that would make it difficult down the road to establish a clear title.

I thought escrow and the title company was the same thing? What exactly would the title company provide other than title insurance, which I could get on my own at a later time?

 

[LdiJ]

I thought escrow and the title company was the same thing? What exactly would the title company provide other than title insurance, which I could get on my own at a later time?

You cannot get title insurance "at a later time".

 

[justalayman]

a title company can do a lot of things. One of the most important is they are the agent for a title insurance company. Before insurance will be issued, the title company will do a title search to review the insurability of the title. That is something you should be seriously interested in.





Many of them will also provide deeds and act as the closing agent. The closing office also generally takes care of properly registering the deed and paying the property taxes as well as any other transactions the come from the sale all out of the transaction funds.


you might call a title insurance company or two and ask them what services their office provides. You will likely be surprised.

 

[Biscuits&Gravy]

F it. I'll just go through escrow like any other transaction. Wanted to avoid the fees that come along with the sale but also don't want to have problems if I try to sell.

 

[justalayman]

OK. You are not understanding what escrow is and why it is not likely relevant and necessary in your case but I believe that is only due to your misunderstanding of what escrow actually is.

 

[Biscuits&Gravy]

I did read your previous posts and everything you described sounds like it's something the escrow company does, at least that's what I thought based on my past experience in purchasing properties. I have purchase 3 properties and we opened escrow with 'Chicago Title'. They did everything in order to close. But from what you are saying is Chicago title has two entirely different departments that handles the transaction?

Edit: Will be taking your advice and giving them a call tomorrow about their services.

 

[justalayman]

I did read your previous posts and everything you described sounds like it's something the escrow company does, at least that's what I thought based on my past experience in purchasing properties. I have purchase 3 properties and we opened escrow with 'Chicago Title'. They did everything in order to close. But from what you are saying is Chicago title has two entirely different departments that handles the transaction?

Edit: Will be taking your advice and giving them a call tomorrow about their services.

Aha!!!


Chicago Title.


escrow, in the simplest terms, is a bank account that any party that has money involved pays into. The controller of the escrow (Chicago Title in your case), upon closing, distributes the money in the account to the appropriate parties.


In some cases, there is no need to open an escrow account. If you do it that way, the buyer hands the seller money and trade any paperwork that is required. You would then have to make sure the deed is registered; the property taxes are properly addressed, and anything else that requires payment or registration is taken care of. The title company, acting as a closing agent, can and will take care of all of that if you engage them to do so. I typically do since they are already doing a title search and sourcing title insurance for me but it is not required. It is simply a matter of; they do this for a regular business and know the proper methods and calculations needed to take care of business. It is simply easier to have them take care of that part of the business for me.

Even if the title company acts as the closing agency, there is not necessarily a need to open an escrow account. As I said, that is essentially nothing more than a glorified bank account that the escrow company (title company in your situation) controls. It is beneficial when there is financing involved (both on the buyers and sellers parts) as the escrow account is used to transfer payoff funds and new financing funds for the transaction. There are myriad entities that may pay into or receive payment from the escrow account. In your situation, while I, personally, would likely use the title company for the closing activities, it sounds like there is no need to actually open an escrow account.