Simply put, an escrow means the deposit of a deed, funds, or any other item by one individual, to be given to another party, upon successful completion of an event or condition.
Escrow: Why you need it
It makes no difference whether you are a borrower, lender, seller or buyer, you will need the guarantee their neither funds nor property will change possession until all transaction instructions have been performed and carried out. The holder of the escrow has the responsibility to hold and protect these items while in their possession, and to disburse said assets, or convey the title when all portions of the escrow have been adhered to and completed.
Escrow: How it Works
The principals in the escrow will normally be the seller, buyer and lender, and they will place escrow instructions into writing, as well as sign and deliver them to the appointed escrow officer. If there is a broker involved, he or she will provide the officer with the necessary information to prepare your escrow documents and instructions.
The escrow official will then process the included escrow as per the instructions. When all the required conditions are met, he will close the escrow. All escrow accounts will follow a fairly similar pattern, but each will be differing in some ways, as it relates to your property and your particular transaction.
An escrow holder’s duties include the following:
Escrow: Who chooses?
The decision on who to choose as the holder of escrow is usually agreed upon by all parties involved. If there happens to be a real estate broker assigned to the transaction, he or she may be able to recommend a potential escrow holder. Regardless of who chooses the holder, you must be sure they are competent and able to handle your particular type of escrow. There are laws in place to prohibit any type of referral fee being paid. This allows all parties to be sure of the best services available without worrying about a conflict of interest issue due to the holder being paid a referral fee.