Escrow is an arrangement in which a neutral third party, called an escrow closer, holds documents and funds on behalf of a buyer and seller, and distributes them according to the buyer’s and seller’s instructions.
People buying and selling real estate often open an escrow for their protection and convenience. The buyer can instruct the escrow closer to disburse the purchase price only upon the satisfaction or completion of certain prerequisites and conditions, like the Seller providing a deed and clear title to the property. The seller can instruct the escrow closer 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 closer to carry out faithfully their 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, deed, and many other items, using the escrow closer as the central contact point. If the instructions from all parties to an escrow are clearly drafted, fully detailed and mutually consistent, the escrow closer can take many actions on their behalf without further consultations. This saves much time and facilitates the closing of the transaction.