Escrow is a written agreement (for property or money) delivered to a third party or put in trust by one party to a contract to be returned after fulfillment of some condition.
Escrow is the process by which property is transferred from one party to another, and where the conditions set forth within the Purchase and Sale Agreement, Loan Commitment and other written instructions are satisfied. The escrow process brings together all of the people, paper, money and answers the question—Who gets the money? And who gets the property?
It is important to have a neutral third party involved to assure that everyone’s interests are met. The costs for the escrow company are generally split between the buyer and the seller equally and are also a part of the “Closing Costs.”
Escrow instructions define all the conditions that must occur before the transaction can be finalized. Your escrow instructions specify, in a debit and credit format, the disposition of your purchase funds. They also provide for title protection for your home.
Your escrow officer will contact you to make an appointment for you to sign your escrow instructions and final loan papers. At this time, the escrow officer will also tell you the amount of money you will need (in addition to your loan funds) to purchase your new home. Your loan funds will be sent directly to escrow by the lender. You may sign your escrow contract instructions and loan documents at the escrow company’s office, or some other location that is convenient.
Written evidence of your deposit is generally included in your copy of your purchase contract. Your funds will then be deposited in your separate escrow or trust account and processed through your bank.