Escrow Basics

Escrow is the process during which a neutral, third party is hired to gather all the information needed by you and your Buyer or Seller to close your transaction.  They make sure all points of the contract are fulfilled,  receive and pay out all funds and handle all documents, completing and filing required forms and obtaining release documents for any loans or liens that are paid off as part of the transaction.

Typical documentation collected by the escrow agent/holder includes:
  • Loan documents
  • Tax statements
  • Fire and other insurance policies
  • Title insurance policies
  • Purchase agreement
  • Documentation related to seller-financing
  • Requests for services to be paid out of escrow funds.

Upon completion of all escrow instructions, the closing can take place. All outstanding payments and fees are collected and paid, and title to the property is transferred and the title insurance issues, as dictated by the escrow instructions.

An Escrow Agent/Holder does the following:

  • Prepares escrow instructions
  • Requests a title search
  • Complies with lender instructions specified in the escrow agreement
  • Receives funds from the buyer
  • Prorates insurance, tax, interest and other payments according to instructions
  • Records deeds and other documents as instructed
  • Requests the title insurance policy
  • Closes escrow when all instructions of the seller and buyer have been met
  • Disburses funds and finalizes instructions.

Considering the amount of information they handle and the peace of mind they provide, a good escrow officer charges very reasonable rates.

An Escrow Agent/Holder does NOT do the following:

  • Give advice to either party – the escrow agent is a neutral, third party
  • Offer opinions about tax implications.
  • Do anything that is not legal and agreed to by BOTH parties to the transaction.