Featured Properties  •  Shop for a House  •  Mortgage Information Sunday Open Houses  •  Thursday Broker's Tour  •  Escrow Information Buyers Say  •  Costs of Ownership  •  How I Work With Buyers Escrow Defined What Is Escrow? The word "escrow" is derived from the French word, 'escroue' meaning a scroll or roll of writing. Escrow can be considered a period of time as well as a place. It is the period of time that begins when an offer to purchase real property is accepted by all parties, and ends when title is transferred into the name of the new owner. During this period of time, called the escrow period, many different actions are taken in preparation for transfer of title, such as obtaining new financing and insurance, and obtaining information to discharge the existing liens such as mortgage and property taxes. This is also usually the period of time when the buyer inspects the property, and reviews and approves disclosure information about the condition of the property. Escrow is also a particular place; a neutral holding ground for monies and documents associated with the transaction. The escrow service is provided by an escrow company (in this area escrow and title services are housed in the same place, called the title company). Escrow can also be considered as the depositing of funds and documents by the parties with an impartial third party pending completion of the terms of the escrow instructions. When the parties deliver documents and money to the impartial Escrow Officer to be held for further delivery until certain conditions have been met, we say the documents are held "in escrow". We may also say the parties have "opened an escrow". Each of the principals of the escrow (seller's agent, buyer's agent, lender) will give to the Escrow Officer written instructions setting out the conditions under which title may transfer to the new owner. The Escrow Officer may only act on those instructions which are consistent with all principals. The Purpose of an Escrow The common use of an escrow is to enable the parties in a real estate transaction to deal with each other with less risk, since the escrow holder acts as: Custodian for funds and documents A clearing house for payment of all demands An agency to perform the clerical details for the settlement of the accounts between the parties. Typical Escrow Transaction Typically, an escrow begins with the customer (buyer's agent) "opening the order for title work". In other words, giving the escrow company the necessary information regarding the transaction and requesting that it prepare a title report. There are two basic types of title reports: a preliminary report and a commitment. A preliminary report provides the customer with an analysis of the present status of the property as revealed by the public records filed or recorded in the county in which the property is located. A commitment (issued in some jurisdictions) additionally specifies the requirements which must be met in order to issue the requested insurance. Upon receipt of the preliminary report, an analysis is made to determine the necessary action and documents required to complete the transaction: demands for satisfaction of liens not acceptable to buyer and/or lender; documents for recording; instructions and requirements of the new lender. In most areas, buyers and sellers instructions are prepared for signature from the information gathered. When all the title and financial requirements are met and instructions from all parties can be fully complied with, the escrow can close. Then the financial settlement takes place, the new deed is recorded and the title insurance policies are issued. « Back to Escrow

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