Escrow is the neutral party integral to the transfer of property in Hawaii.
Escrow acts as the guardianship where all monies are held, documents are prepared, signings are facilitated, title searches are instructed, and all the checklist items necessary from both buyer and seller, as well as lender, attorneys, and title departments, are coordinated to streamline the exchange of property. Escrow serves as a necessary intermediary to the Purchase Contract where all papers and monies are ultimately deposited. Escrow also refers to the transaction stage and process of a purchase.
As a noun escrow means a bond or deed, kept in third party custody, to take effect when conditions have been satisfied, to place in to trust or custody hence the phrase “in escrow”.
When we say “we are in escrow” this means that the offer for the purchase of property has been bilaterally accepted and the property goes into a pending status. The appointed escrow officer receives copies of the agreement and opens a file which will remain active until its successful conclusion which is the recordation at the Bureau of Conveyances confirming the sale. The morning of recordation is the day the keys are handed over from seller to buyer and the buyer takes possession.
In many states and Canada this process is handled by an attorney. In Hawaii, the attorney is party only to drafting of the Deed to the property.
Likewise, in some states, the exchange of keys is done at the table also referred to as the closing when all parties sit down and sign the closing documents which may include the lenders package if applicable, affidavit and all other required documents including the deed. Keys are handed over and the deal is completed same day at the table.
In Hawaii, closing is effected by the recordation process which occurs at the Bureau of Conveyances with the State of Hawaii located in Oahu.
Because we do not have this agency in Maui, there is a 2-day lag on recording which means all necessary signatures and paperwork is “pouched” and sent to Honolulu, queued for the Bureau of Conveyances to effect recordation. This is coordinated in time with funds being made ready for deposit to the seller at closing (loans are funded and cash must be deposited 2-days prior to closing). Ownership is then considered transferred.
This happens on weekdays and typically between 8-830am escrow calls the agents to the transaction to confirm that “we have recorded!” at which point the sellers agent liaises with the buyers agent to hand over keys. As such, we do not see closings occur on weekends in Hawaii. Because the Bureau of Conveyances is a state agency, we see this office is closed on state and federal holidays, which coincides with escrow offices also being closed. This is important to note when counting backwards the days of the transaction to incorporate any possible holidays that fall within the timeframes of an escrow.
A number of escrow companies in Hawaii are affiliated with their own title companies and the title searches are therefore conducted “in-house”. Title searches and title insurance are both required in the exchange to ensure clear title and to protect both seller and buyer from future claims against the property. Escrow handles the ordering of a Preliminary Title Report which reveals the parameters of the property, the taxes owing or paid, liens against the property or encroachments and encumbrances. These issues are then addressed during the escrow/transaction process to ensure any defects or claims against the property are settled prior to the exchange.
The escrow officer keeps all parties alerted to the progress of the file, communicating with all parties to ensure the process is error free.
The elements of a transaction are handled by each side, the sellers agent works with the seller, the buyers agent works with the buyer, and both buyers and sellers agents work with escrow as well as lenders, County tax offices, etc., to bring together the fulfillment of contingencies in order for timelines, appointments, inspections, monies, paperwork, guidance, coordination and resultant exchange takes place.
There are many moving parts in the process of a transaction and escrow becomes the source of contact for all party to the process. The hub in the wheel, escrow is a fundamental part of transacting property in the state of Hawaii.
Maui Real Estate Continues to be a Smart Idea!
I’d be happy to assist you and your friends with housing market data or help with any questions! Maui living is a daily blessing I am eager to share! Please send me an email or give me a ring, I guarantee Aloha!
Let’s get you “in escrow!”