What Happens In Escrow?

Escrows provide a mechanism to assure safety and convenience in carrying out the provisions of an earnest money agreement, and to assure that the rigid body of rules peculiar to real property transfers is carefully observed. An escrow provides:

(a) An impartial custodian who holds the funds and documents and makes concurrent delivery of the transfer documents to the buyer and the purchase money to the seller at the moment when the terms and conditions of the transaction have been performed;

(b) A “clearinghouse” for the payment of all liens and other encumbrances;

(c) A trained agent who performs all details in prorating and adjusting accounts between the parties, and assumes responsibility for the many ministerial tasks involved in closing.

The function of the escrow agent is very closely related to title examination. The buyer will usually demand a preliminary title report prior to depositing his funds. The buyer’s instructions will enumerate the exceptions or encumbrances allowed to remain on the property at closing. To assure compliance with the buyers’ instructions the title company must re-examine the records of title at the time of closing and, as escrow agent deliver the necessary title insurance policies and documents, and disburse the funds.

When an escrow is placed with the title company, the control of title documents and records is centralized under “one roof.” The escrow agent has the complete facilities of the title plant at his fingertips.

What Services Does An Escrow Agent Perform?

· prepares the necessary instructions from the buyer and seller and receives the necessary 
  documents and funds.

· pro-rates interest on liens to be assumed.

· pro-rates rent.

· pro-rates taxes

· pro-rates and obtains endorsements of existing fire insurance policies when requested
  by a lender or a party to escrow.

· clears checks deposited by purchaser through banking channels

· obtains title insurance for protection of buyer and lender.

· closes transaction when instructions of buyer and seller can be satisfied by recording 
  legal documents and disbursing funds.

· pays liens and costs authorized by parties.

· furnishes each party with a closing statement showing disposition of funds in the
  transaction.


The escrow fee is usually split between the buyer and seller, but this can be changed by agreement of the parties.

Real estate brokers, attorneys, and lending institutions, among others, confidently use the escrow as a sure method for coordinating many of the details in a real property transaction. The reliability of your title company, as escrow agent, creates a team with these specialists to effect a smoother, more efficient and timely closing.

The seller is assured that the transaction will be properly and promptly closed. Specially trained personnel will see that every detail of the instructions are carefully followed, and that title will not pass to the buyer until the purchase price is fully paid, or the seller’s provision as to security for unpaid balances is fulfilled. If the seller intends to use part of the purchase price to satisfy liens on the property, the escrow provides an efficient method for paying off the liens.

The buyer is assured that the transaction will be closed in accordance with buyer’s instruction, and that the funds will not be paid to the seller until the transaction is properly completed. If the buyer needs to use the property as security for a loan to pay part of the purchase price, the escrow guarantees the lender that title is exactly as required, and provides a safe method for delivery of loan proceeds or security documents.

Escrow information is always kept in the strictest confidence. The information in the file pertaining to the transaction will be available for a minimum of six years after closing.

How Can I Assist the Escrow Agent in Closing?

To assist your escrow agent with your closing, you should provide your escrow agent with:

· the correct legal description from the deed, prior title policy or current survey

· full names, addresses and telephone numbers of the parties

· statement as to how buyer wants to take title

· names and loan numbers of all holders of mortgages, deeds of trust and contracts of
  sale

· terms of new encumbrances

· current tax bills and receipts

· complete list of tenants, rents, and deposits

· names of legal counsel who may represent parties in transaction.

Usually, most of this information will be stated in the earnest money agreement, a signed copy of which should be furnished to the escrow agent.