§         What Exactly Is An Escrow?

*        An escrow occurs when a neutral third party holds the documents and monies involved in a real estate transaction and ensures that all conditions of the transaction are met. Escrow also refers to a special account that a lender establishes to hold monthly installments from the borrower to cover property taxes and insurance.

§         What Does An Escrow Holder Do?

*        An escrow holder is a neutral third party who takes instructions based on the terms of the real estate transaction and, when necessary, the lender's requirements.

§         What Are The Duties Of The Escrow Holder?

*        Receiving and holding all monies, instructions, and documents pertaining to the real estate transaction.

*        Serving as the communication link and liaison between all parties.

*        Requesting a preliminary title search to determine the condition of title to the property.

*        Requesting a beneficiary statement or payoff demand from existing lenders.

*        Holding inspection reports, deeds, and insurance documents.

*        Complying with the lender's requirements in its instructions to escrow.

*        Preparing or obtaining the grant deed.

*        Prorating taxes, interest, insurance, rents, and other costs related to the property.

*        Recording the deed and other documents.

*        Requesting the title insurance policy.

*        Closing the escrow according to the instructions of the buyer, seller, and lender.

*        Disbursing funds as authorized by the instructions, including charges for real estate commissions, loan payoffs, title insurance, taxes, recording fees, and other costs.

*        Preparing final statements of disposition of all funds.

§         Key terms and phrases commonly associated with escrow include:

*        Escrow payment:

²     Funds that a mortgage servicer withdraws from a borrower's escrow account to pay property taxes and insurance.

*        Escrow analysis:

²     A lender's periodic examination of an escrow account to determine if the lender is withholding enough funds from a borrower's monthly mortgage payment to pay for expenses such as property taxes and insurance.

*        Back-to-back escrow:

²     Arrangements that an owner makes to oversee the sale of one property and the purchase of another at the same time, also known as a concurrent closing.

*        Escrow closing:

²     An escrow closing occurs when all conditions of a real estate transaction are met and the title of the property is transferred to the buyer.

*        Escrow Company:

²     A firm that acts as a neutral third party to ensure that all conditions that the buyer, seller, and lender establish in a real estate transaction are met.