What is Escrow?
My clients that are buying and selling homes in the Corvallis and Albany areas frequently, ask ”What is escrow? 
In general, “escrow” is the neutral third party that holds instruments (deeds or other documents that convey ownership); funds (or other items of value); or evidence of title for real or personal property. In Oregon, the escrow agent is typcially a Title Insurance Company (but this does not always have to be the case).
In a real estate transaction, “escrow” is the neutral third party that holds the deeds, collects and disburses the funds and follows instructions on behalf of the parties to the transaction.
It is the function of escrow in a real estate purchase transaction to make sure that all the instructions (which are really the terms of the sales agreement and the lend, er instructions) are followed; that all bills are paid (through the instruction of the buyer, the seller or the lender) and that funds are disbursed (lender loan proceeds, seller’s proceeds and any excess monies deposited by the buyer to the buyer).
Escrow follows the instructions of the parties to the transaction to determine how proration of taxes and other re-occuring charges such as homeowner association fees are handled. Escrow also makes sure that appropriate parties such as taxing authorities, homeowners associations, water districts and so forth are notified when there is a change of ownership. Escrow does not typically notifiy public utilites of changes of ownership. An owner that is selling should notify their hazard/homeowners insurance of the sale (but not until the sale is completed and the sellers proceeds are disbursed.)
Escrow is also responsible by law for the collecting of information and reporting of sales information to the state and federal government in the event of a possible income tax liability on the part of the seller of real estate. It’s important that sellers and buyers understand the tax ramifications of their transactions prior to closing. Escrow will send out questionnaires to be completed early in the process to help alleviate problems that can arise from tax consequences of a sale (such as FIRPTA and State and Federal witholding requirements), if for some reason you do not receive paperwork from the escrow company early in your transaction, you will want to check on it.
Escrow is not allowed to act independently. In general, once a buyer’s earnest money deposit is “in escrow” escrow cannot release those funds without express instructions from all parties. Escrow is not allowed to proceed with finalizing or cancelling a transaction without instructions from all parties. If there is a dispute that arises from disagreements from any of the parties to the transaction, escrow must wait for instructions between the parties that are consistent before they act upon them.
It’s important the that escrow agent: be finanacially responsible (and have financial strength); have expertise in handing complex transactions; act in a manner to assure that payment of liens and other encumbrances is accomplished; provide single point of contact for coordination of flow of documents and funds; remains an impartial third party.
If you need more information or have specific questions I can answer, please get in touch. Contact Dava
« Intregity In Life… Really “Getting It” | Home | A New Resource for First Time Homebuyers »
Equal Housing Opportunity. Each Office Is Independently Owned and Operated.
Comments are closed.