Escrow Process

The process of escrow assures that no funds or property will change hands until all of the transaction instructions have been faithfully followed and completed. Acting as an unbiased and impartial third party, the escrow agent protects all funds and documents and distributes each only after all escrow conditions are achieved.

How does escrow work?

The buyer, seller, lender, borrower, the principals, will create escrow instructions, generally in writing, to be signed and delivered to the escrow officer. Normally, if a broker is involved, she/he will provide the Escrow Officer all necessary information for the creation of your escrow instructions and documents. At that point, the Escrow Officer processes the escrow according to the prepared instructions. Upon completion, and only when all required escrow conditions have been met, the escrow will be closed.

What are the duties of an escrow officer?

The Escrow Officer performs many duties, which may include, but are not limited to:

  • Adhering to the instructions set forth by the principals and all parties to the transaction
  • Processing the Escrow in a quick and efficient manner
  • When all terms have been complied with, he/she closes the Escrow
  • Paying all authorized bills, fees and charges
  • Disbursing funds in accordance with instructions
  • Providing the Closing or Settlement Statement

Please remember that Escrow Officers are not attorneys, cannot practice law, cannot offer legal advice and cannot relate personal opinions about the transaction.

During escrow, what’s my role?

First, be sure to read and understand your escrow instructions so you know what to expect. Direct any questions regarding your instructions to your Escrow Officer. He/she is chartered to follow the instructions set forth by the principals to the escrow. To ensure the timely close of your transaction, always try to respond to requests and correspondence promptly. Procedures differ, but you will be required to deliver funds into the escrow in the form required by your Escrow Officer. If you have any immediate or special need on the day of closing, such as checks, title issuance, policies, wires or statements, proactively advise your Escrow Officer.

How does my loan work with escrow?

Your Escrow Officer provides your lender with the escrow instructions, the preliminary report and any requested documents. The Escrow Holder is required to comply with the lender’s instructions when processing your closing. With a new loan, many lenders forward loan documents to escrow to facilitate signing of lender documents. Because these are lender documents, your escrow officer cannot interpret or explain them. Therefore, you can request that a lender representative be present at your signing to clarify any questions you have pertaining to the loan arrangements or documents.

What is a closing statement?

The closing statement is a straightforward, written financial record compiled at the close of escrow that lists itemized charges and credits to your account. When you receive your closing paperwork, examine the closing statement carefully and direct any questions you may have to your Escrow Officer. Items shown on the statement will include:

  • Purchase price
  • Funds deposited or credited to your account
  • Funds you are entitled to at the close of the escrow
  • Payoffs on existing encumbrances and/or liens
  • Costs for all services

The IRS often requires you to submit your costs and/or profit on the sale of any property so be sure to safely store your closing statement and all related escrow paperwork for income tax purposes.