The Clear Guide to Disbursement Priorities –
At Secured Trust Escrow, we like to explain disbursement order like a well-organized wedding reception – there’s a specific sequence to who gets “served” first when the money comes out. After processing over 30,000 escrows, we’ll break down exactly who gets paid when, why the order matters, and how to avoid surprises at closing.
The Escrow Money Pipeline: Why Order Matters
Imagine escrow funds as a limited water supply flowing through pipes – we need to direct it properly so:
– Legal obligations are met first
– Everyone gets exactly what they’re owed
– No one gets “short-changed” by accident
Here’s the official payment sequence we follow in every California escrow:
1. Government Gets First Dibs (Uncle Sam Always Wins)
First Payments Out:
– Property taxes (prorated amounts)
– Recording fees (county charges)
– Transfer taxes (city/county levies)
– IRS liens (if applicable)
Example: In a $1M home sale, $12,000 might go to taxes before the seller sees a dime.
2. Existing Lenders Get Their Share
Next Priority:
– Payoff first mortgage
– Payoff second mortgage/HELOC
– Home equity loans
Pro Tip: We always order payoff demands 10 days early to verify amounts – you’d be shocked how often lenders make mistakes.
3. Service Providers Get Compensated
Now We Cover:
– Title insurance premiums
– Escrow fees (that’s us!)
– Home warranty plans
– Pest inspection/treatment
– Homeowner association fees
Fun Fact: Our escrow fees always show up on page 2 of the settlement statement – we don’t believe in hiding charges.
4. Real Estate Professionals Get Paid
Then Comes:
– Listing agent commission
– Buyer’s agent commission
– Broker fees (if applicable)
Important: Commissions get wired directly to brokerages, not individual agents.
5. Finally… The Seller Gets Their Money!
Last (But Definitely Not Least):
– Remaining proceeds to seller
– Typically via wire transfer
– Usually received within 24 hours of recording
Client Story: We once had a seller faint when seeing their $2.8M wire arrive (we recommended sitting down first after that).
Special Case: Business Sale Disbursements
For business transactions, the order adjusts slightly:
1. Business debts/lien payoffs
2. Inventory/equipment liens
3. ABC license transfer fees
4. Broker commissions
5. Seller proceeds
The 3 Most Common Priority Disputes (And How We Prevent Them)
1. “Why Are Payoffs Coming Out of My Money?”
Some sellers are surprised existing loans reduce their proceeds. We:
✓ Provide preliminary net sheets early
✓ Explain all payoffs in plain English
✓ Verify payoff amounts ourselves
2. “The Agent Commission Seems High!”
When commission disputes arise, we:
✓ Include commission agreements in opening docs
✓ Flag any percentage changes immediately
✓ Require signed amendments for adjustments
3. “Where Did All the Fees Come From?”
For unexpected charges, we:
✓ Disclose all estimated fees upfront
✓ Provide line-item explanations
✓ Negotiate service fees when possible
How Our Disbursement Process Prevents Errors
At Secured Trust Escrow, we’ve engineered a foolproof system:
🔍 Triple-Verification – Three team members check every disbursement
⏱️ Same-Day Processing – Wires go out by 1pm PST cutoff
📊 Real-Time Tracking – Clients see exact payment timing
📞 Pre-Disbursement Calls – We confirm wire details verbally
Our Record: 17 years with zero misdirected disbursements.
What Could Go Wrong Without Proper Priorities?
We’ve cleaned up enough escrow messes to know:
🚨 A seller almost lost their home because another escrow company paid them before the mortgage payoff
🚨 An agent nearly missed commission when liens consumed all proceeds
🚨 A buyer’s down payment was nearly applied to wrong fees
Proper disbursement order isn’t just helpful – it’s legally mandatory.
Your Top Disbursement Priority Questions Answered
Q: Can we change the payment order?
A: Rarely – California law dictates most priorities. Some business sales allow flexibility.
Q: What if there’s not enough money?
A: We identify shortages early and work with all parties to adjust.
Q: When do I get my exact payoff amounts?
A: We secure these 7-10 days before closing for accuracy.
Q: How are prorated items calculated?
A: Down to the penny and shown on your settlement statement.
Why Choose Secured Trust Escrow?
We’re California’s most trusted escrow company because we:
✔ Specialize in complex disbursements – Business, probate, ABC licenses
✔ Employ former title officers – Who know every county’s quirks
✔ Offer transparent pricing – No hidden fees ever
✔ Provide 24/7 access – To your disbursement status
✔ Maintain perfect compliance – 100% audit success rate
Don’t leave your money’s journey to chance. Work with disbursement experts who treat every dollar with care.
