Escrow
The finalization of a transaction by use of a third party known as an escrow agent, or escrowee, who holds onto certain monies and documents until the fulfillment of certain criteria outlined in the escrow agreement.
For ongoing mortgage relationships, lenders often maintain escrow accounts to collect and pay property taxes and insurance premiums on behalf of homeowners.
What is an Escrow Account?
A separate account managed by an escrow agent, company, or attorney where the buyer’s earnest money deposit is held until closing.
What is an Escrow Agent?
The neutral third party (typically a title company, escrow company, or attorney) who manages the escrow process, ensures all conditions are met, and facilitates the transaction’s completion.
What is an Escrow Period?
The time between when an offer is accepted and when the property sale is finalized, typically lasting 30-60 days.
The Escrow Process
- After the seller accepts the buyer’s offer, the buyer deposits earnest money into the escrow account.
- The escrow agent verifies that all contingencies in the purchase agreement are satisfied, including inspections, appraisals, and financing.
- The escrow agent prepares necessary documents, conducts title searches, and coordinates with lenders.
- Once all conditions are met, the escrow agent distributes funds to the seller and transfers the deed to the buyer.
- The escrow closes when the property transfer is complete and recorded with local authorities.
The Benefits of Escrow
Escrow provides important protections for all parties in a real estate transaction by ensuring that:
- The buyer doesn’t release funds until they receive clear title to the property
- The seller doesn’t transfer the property until they receive payment
- All conditions of the sale are properly fulfilled before the transaction completes