WHAT IS ESCROW?
Introduction - The Escrow Process
The need for escrow services arises from the complexity
of doing business, particularly when it involves the consummation
of transactions relating to the sale and purchase of real estate.
Assurance of obtaining required priority, of acquiring a clear
title and obtaining the protection afforded by the recording laws
are of prime importance to purchasers of land, lenders of mortgage
loans and to investors. The escrow closing is the tool used to
fulfill these needs.
In essence, the escrow process involves the buyer
and seller engaging a neutral third party, the escrow agent, to
protect each individual party's interest and to insure that each
condition imposed by the respective principals has been performed
prior to the conclusion of the transaction. The escrow agent
also may be requested to perform certain incidental services for
the parties.
"Common" Definition of Escrow
The term "escrow" is commonly used to describe
a process wherein a neutral third party or stakeholder holds money
and other consideration provided by a buyer, and the deed and
other documents provided by a seller. The stakeholder makes an
exchange of the consideration provided by each of the parties
when all of the conditions imposed by these parties have been
met. The conditions subsequent upon which the escrow agent acts
are found in the instruction of the parties, or principals, to
the escrow.
"Traditional" Definition of Escrow
The traditional definition of the term "escrow"
was a writing, deed or other property delivered by the grantor
or seller into the hands of a third person which was held by the
third person until the happening of a contingency or the performance
of a condition. When the contingency occurred or the condition
was performed, the property was then delivered to the grantee
or buyer.
