What is Escrow?

Escrow is a process that evolved to ensure protection for all parties to a real estate transaction. A “neutralthird party” or “stakeholder” was nominated to hold the funds until the purchaser received appropriate assurance that the property had been transferred. An escrow may also be created for other purchases, although it is most commonly used during the transfer of real estate. Today the escrow is overseen by an escrow officer employed by an independent escrow company or title company. All parties are protected because the escrow holder will retain funds and documents until all the instructions are fulfilled. An escrow is created when money and/or documents are deposited with the escrow officer. The escrow officer’s authority is strictly governed by written instructions, mutually agreed upon by the parties involved. The instructions direct the escrow holder to perform duties necessary to complete the transaction. A few of the tasked required are listed below.

Escrow Requirements:

• - Receive and deposit earnest money
• - Order information for payoff of existing liens
• - Calculate and/or prorate taxes, liens, interest, rents,
• and insurance policies
• - Make arrangements for title insurance protection for
• the buyer and lender
• - Prepare and/or receive documents relating to escrow
• - Request and receive funding from new lender with
• conditions have been satisfied
• - Arrange for recording of the conveyance documents
• and any other legal instruments required to transfer
• title to the property pursuant to the terms of the
• purchase agreement
• - Close the escrow and disperse funds as agreed upon
• in the instructions
• - Prepare a closing statement for the parties showing
• disposition of funds