The Escrow Process

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.