Escrow in the state of Hawaii is a confidential and impartial third party who holds money and/or documents in safekeeping until such time that all terms and conditions have been met. In regards to a real estate purchase transaction, escrow will follow the original sales contract, which is usually in the form of a Purchase Contract (Contract). Escrow duties include: holding deposits, ordering title searches and conveyance documents, clearing title, making pay-offs to existing lenders, providing a settlement statement, handling closings with sellers and buyers, recording documents, and disbursing all funds when the conditions of the Contract have been fulfilled.
Escrow handles the necessary details to finalize a real estate transaction so that clear title can be legally conveyed from seller to buyer. The process begins with the signing of the Contract and continues until closing, at which time the buyer takes title to the property. This usually takes between two weeks and two months, depending on the specific conditions that must be met and a variety of other issues.
The escrow officer is the person responsible for tending to each and every detail necessary for the transaction to close smoothly, correctly, and expediently. Throughout the execution of his or her duties, the officer acts as an unbiased third party, representing neither the buyer nor seller. The escrow officer strives to meet the needs of both parties in working toward the ultimate completion of the transaction.
The following serves as a guideline to better understanding the step-by-step process of an escrow transaction:
- Your Maui real estate agent will deliver an original sales contract (Contract) to Island Title to open escrow. Upon receipt, the escrow officer will review the Contract and address any questions. An escrow file will be opened and assigned an escrow number.
- Escrow will request a title search from our Title Department. A title search should be completed within 3 business days.
- Escrow Instructions (instructions to the escrow agent to act as a depository for monies and instructions) are prepared and sent to the seller and buyer for their signatures. Copies of the Escrow Instructions are also sent to their Realtors.
- Escrow will submit Demand requests to lenders for current mortgages on the subject property. It is necessary to obtain accurate pay-off figures because escrow has been instructed to pay off all mortgages.
- Upon receipt of the title search, escrow will review the report to address defects in the title, additional liens, and/or mortgages that were not previously disclosed in the contract. If necessary, additional Demands will be requested from creditors. Contingencies specified in the contract and financing requirements are also reviewed.
- The conveyance documents (Deeds or Assignments of Leases) will be ordered from a local attorney.
- Demands, Documents, the Contract, and any Special Conditions will be reviewed and updated where necessary.
- Closing statements will be prepared and closing (signing) appointments will be arranged. The buyer and agent will be advised of the closing figures due at the time of the closing (usually in the form of a cashier's check).
- All necessary documents will be forwarded to the Recording Department for the actual recordation of the documents at the Bureau of Conveyances of the State of Hawaii. Usually this occurs within 2 days following the signing.
- The Recording Department will notify escrow when the documents have been recorded. Escrow can then disburse all funds, such as the seller's proceeds, mortgage pay-offs, real estate agent’s commissions, etc. Escrow will then notify your agent that the transaction has been completed.
- Escrow will forward final documents to all interested parties: buyers, sellers, lenders, etc.