What is Escrow?

WHAT IS ESCROW?

To new Buyers and even new Agents, being “in Escrow” on a property can be an intimidating and scary place.

After all, a transaction that “Fell out of Escrow” is a transaction that could not be completed, leaving disappointed Buyer, Seller and of course Agents!

An Escrow is a contractual arrangement in which a third party (Escrow Holder) receives and disburses money or documents for the primary transacting parties (Buyer and Seller) with the disbursement dependent on conditions agreed to by the transacting parties.

If any contractual conditions cannot be made, then Escrow cannot close without MUTUALLY agreed upon changes to said contract.  (Contract Amendment, and/or Escrow Amendment.)

The Escrow Holder should be a neutral Third Party to the transaction representing both the Buyer and the Seller.

FIDUCIARY RESPONSIBILITIES

Fiduciary:  A person or legal entity, who holds a legal or ethical relationship of trust with one or more other parties.

There is a fiduciary responsibility of the Escrow Holder to follow instructions by the “Principals” of the transaction (Buyer and Seller), even if they may conflict with the other auxiliary parties, such as the agents or lenders.

These instructions must be MUTUAL.  If Escrow receives from either party contrary to the MUTUALLY agreed upon instructions, Escrow will stop until the Buyer and Seller can come to a MUTUAL agreement.

Please see the articles “Steps of an Escrow”  and “Understanding the Residential Loan Process” for the detailed steps and processes of a transaction.