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What Is Escrow?
An escrow is an arrangement in which an objective third party,
called an escrow holder, holds legal documents and funds on behalf of a buyer and seller,
and distributes them according to the buyer's and seller's instructions.
People buying, selling and refinancing
real estate often open an escrow for their protection and convenience. The buyer
can instruct the escrow holder to disburse the purchase price only upon the satisfaction of certain prerequisites and conditions. The seller can instruct the escrow holder to
retain possession of the deed to the buyer until the seller's requirements, including receipt of the purchase price, are met. Both rely on the escrow holder to carry out
faithfully their mutually consistent instructions relating to the transaction and to advise them if any of their instructions are not mutually consistent or cannot be carried
out.
An escrow is convenient for the buyer and seller because both can move forward separately but simultaneously
in providing inspections, reports, loan commitments and funds, deeds, and many other items, using the escrow holder as the central depositing point. If the instructions
from all parties to an escrow are clearly drafted, fully detailed and mutually consistent, the escrow holder can take many actions on their behalf without further consultation.
This saves much time and facilitates the closing of the transaction.
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