Escrow is a process that provides for a fair and equitable transfer of property from one person to another.
When parties deliver documents and money to an Escrow Officer (to be held for further delivery until certain conditions have been met), we say the documents are held "in escrow." We may also say the parties have "opened an escrow." Each of the principals (seller, buyer, lender) of the escrow will give the escrow holder written instructions setting forth the conditions under which further delivery is to be made. These instructions are usually typed by the Escrow Officer or Escrow Assistant from oral information supplied by the principals or from a contract signed before they arrive at the escrow office.
Typical Escrow Transaction
Typically, an escrow begins with the Escrow Officer opening the order for title work. Based on the information provided, the title company prepares a title report. There are two basic types of title reports: a preliminary title report and a commitment. A preliminary title report provides the customer with an analysis of the present status of the property as revealed by the public records filed or recorded in the county in which the property is located. A commitment (issued in some jurisdictions) additionally specifies the requirements which must be met in order to issue the requested insurance.
Upon receipt of the title report, an analysis is made to determine the necessary action and documents required to complete the transaction: demands for satisfaction of liens not acceptable to buyer and/or lender; documents for recording; instructions and requirements of the new lender. In most areas, buyers and sellers instructions are prepared for signature from the information gathered. When all the title and financial requirements are met and instructions from all parties can be fully complied with, the escrow is said to be "in perfection" and can close. Then the financial settlement takes place, the documents are recorded and the title insurance policies are issued.
An outline of the escrow process is as follows:
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