What happens in escrow?
An escrow is an arrangement in which an impartial third party, called an escrow agent, holds legal documents and funds on behalf of two parties, and distributes them according to the each parties' instructions.
People buying and selling real estate or other of transactions, often open an escrow for their protection and convenience. One party can instruct the escrow holder to disburse monies or documents only upon the satisfaction of certain prerequisites and conditions. Both parties rely on the escrow holder to carry out faithfully their mutually consistent instructions related to the transaction and to advise if any of the instructions are 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 time and facilitates the closing of the transaction.
The escrow process was developed to help facilitate transactons The escrow holder accomplishes this by: