An escrow is created when money and/or documents are deposited by two or more people with a third party* which are to be delivered upon the happening of certain conditions. 

*The third party is known as the escrow agent or escrow holder.

What is an Escrow?

The authority given to an escrow holder is strictly limited by instructions provided by the parties involved. Consequently, an escrow holder acts on mutual instructions deposited into escrow and DOES NOT represent any party. The escrow officer is authorized by instructions to allocate funds for items during the escrow period, such as real estate commissions, title insurance, liens, recording fees and other costs. Instructions also specify the method of collecting funds, proration issues, time limitations and all the terms of the transaction. The escrow process protects all parties involved by retaining money and documents until the mutual instructions are met. See page 13 for the 22 steps to selling a home.

In the Beach Cities, the life of an escrow would include many of the following steps:

Escrow is opened.

Good faith check is deposited.

Escrow drafts “escrow instructions” based on the terms of the consummated purchase agreement. 

Escrow orders a preliminary title report, city report (if required) and a natural hazard report.

Escrow officer coordinates document signers with buyer’s lender.

All parties resolve outstanding issues that might hinder the sale.

Buyer deposits required funds into escrow.

Escrow contacts banks, IRS, lenders, or any other organizations that may have secured liens and determines their current payoff amounts, arranges payoff.

Loan funds (1 day).

Escrow pays banks, IRS, lenders, and private parties to re-convey the outstanding liens.

Title company records property with county registers office, property changes hands (2nd day).

 Selling agent provides buyer with keys.

Last updated on January 24, 2012 by Blake Roberts