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Defining Escrow

Escrow is a real estate term frequently mentioned, but not always understood. It is not applicable for every state, but in California, it is used. In the Merriam-Webster dictionary, Escrow is described as, “a deed, a bond, money, or a piece of property held in trust by a third party to be turned over to the grantee only upon fulfillment of a condition.” What exactly does that mean?

All parties in the home buying or selling process use an escrow. It makes sure that the money (dealing with the lender and borrower) and/or the property (dealing with the buyer and seller) make their transaction at the same time after completing all necessary requirements.

An escrow holder is responsible for ensuring that this occurs. The parties involved (the lender and borrower or the buyer and seller) have to choose an escrow holder. If a broker is involved, they may have recommendations for an escrow officer. The holder needs to be competent and experienced and a trusted third party by both sides. The parties involved determine the escrow instructions that are taken to the escrow holder. The instructions include the conditions that have to be met in order for escrow to be accomplished. The escrow holder is responsible for processing the escrow by complying with the instructions. All escrow holders perform duties a little differently as each escrow is based upon the desires of the two parties involved. But the holder will always have to keep the funds and/or the property title until the escrow instructions are completed and the fund or title can be distributed. Once the necessary items are disbursed, the escrow is closed.

Escrow is essential to the home buying and selling process. Let us know if you any questions!

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