The Escrow Process

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What Exactly Is An Escrow?
An escrow occurs when a neutral third party holds the documents and monies involved in a real estate transaction and ensures that all conditions of the transaction are met. Escrow also refers to a special account that a lender establishes to hold monthly installments from the borrower to cover property taxes and insurance.

What Does An Escrow Holder Do?
An escrow holder is a neutral third party who takes instructions based on the terms of the real estate transaction and, when necessary, the lender's requirements.

What Are The Duties Of The Escrow Holder?

• Receiving and holding all monies, instructions, and documents pertaining to the real estate transaction.
• Serving as the communication link and liaison between all parties.
• Requesting a preliminary title search to determine the condition of title to the property.
• Requesting a beneficiary statement or payoff demand from existing lenders.
• Holding inspection reports, deeds, and insurance documents.
• Complying with the lender's requirements in its instructions to escrow.
• Preparing or obtaining the grant deed.
• Prorating taxes, interest, insurance, rents, and other costs related to the property.
• Recording the deed and other documents.
• Requesting the title insurance policy.
• Closing the escrow according to the instructions of the buyer, seller, and lender.
• Disbursing funds as authorized by the instructions, including charges for real estate commissions, loan payoffs, title insurance, taxes, recording fees, and other costs.
• Preparing final statements of disposition of all funds.

Key terms and phrases commonly associated with escrow include:

Escrow payment:
Funds that a mortgage servicer withdraws from a borrower's escrow account to pay property taxes and insurance.

Escrow analysis:
A lender's periodic examination of an escrow account to determine if the lender is withholding enough funds from a borrower's monthly mortgage payment to pay for expenses such as property taxes and insurance.

Back-to-back escrow:
Arrangements that an owner makes to oversee the sale of one property and the purchase of another at the same time, also known as a concurrent closing.

Escrow closing:
An escrow closing occurs when all conditions of a real estate transaction are met and the title of the property is transferred to the buyer.

Escrow Company:
A firm that acts as a neutral third party to ensure that all conditions that the buyer, seller, and lender establish in a real estate transaction are met.