Test Drive | Contents

  What Is Escrow?
  What Are The Requirements For Escrow?
  Why Should I Open Escrow?
  What Does An Escrow Officer Do?
  How Does The Escrow Holder Get Paid?
  Is There Such A Thing As A Timetable For The Typical Escrow?

  What Is Escrow?

Basically, escrow or "closing" is a means for enabling ownership transfers to occur fairly and squarely. Escrow involves an impartial third party brought into a transaction to see that the primary parties, the buyer and seller, perform as they have agreed they would. Escrow enables a buyer and seller to do business with minimum risk because the responsibility for handling the funds and documents is placed in the hands of someone who is not the least bit affected by the outcome. The escrow holder is a disinterested go-between for the parties involved in the transaction, one whose legal obligation is to safeguard the interests of everyone who is affected by the outcome.

Although there may be an escrow involved in many different kinds of transactions, such as refinancing, sales of notes, sales of businesses, sales of business assets, and transfers of liquor licenses, escrow is used most extensively in the sale of real estate. In this context, which is the one this book is all about, escrow may assist in the transfer of real estate, in the transfer of personal property included with real property, or in the processing of a loan. In short, an escrow is useful whenever a third party is needed to assure impartiality and to keep or hold any funds or documents safely until all the details have been settled.

This third party handles all of the details necessary to complete the transaction. Then, after the details have all been taken care of it disburses the documents and monies to the proper parties at the proper time.

You may have wished at times that there was some kind of escrow arrangement available when you sent off your cash, check, or money order for some mail-order merchandise. Unfortunately, you never know whether you'll receive your order or not; plus you don't really know whether you'll be satisfied once you do receive it. Unfortunately, there is no such arrangement available. You just have to hope that the mail-order company is honest enough to send you the merchandise after it receives your money and that it will handle promptly any complaint you might have.

The amount of money involved in any single mail-order transaction is generally insignificant when compared to the amounts of money involved in real estate transactions. That's why escrow is so important to your real estate purchase, sale, or trade. It enables the transfer to take place with the fewest problems possible and ensures full satisfaction of the contract.

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