Escrow is the process where a neutral, third party is hired to gather all the information needed by the parties to close the transaction, including receiving funds and 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.
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.