I’ve been asked this question quite a lot lately. Most people think of escrow as the account in which a lender pays taxes and insurance from or where you go to sign your closing papers in a real estate purchase or refinance transaction. Both are good examples of escrow. For those who have always been curious about what escrow is and what an Escrow Officer does, well here it is.

Whether you are the buyer, seller, lender or borrower, you want the assurance that no funds or property will change hands until ALL of the instructions in the transaction have been followed.

Escrow is the process in which money and/or documents are held by a disinterested third party until the terms, conditions and instructions of all interested parties are satisfied.

In a real estate purchase transaction, once the parties have a written agreement and in most cases loan approval too, the closing process begins and escrow is opened with an Escrow Agent. The Escrow Officer then reviews the preliminary title report and obtains information and documentation necessary to clear title. When title is clear and loan documents have been received from the lender, the Escrow Officer prepares the HUD Settlement Statement which contains a breakdown of all fees, payoffs and settlement costs associated with the transaction. Next, the closing documents need to be signed. In most cases, there are documents that must be Notarized. In other words, signed before a Notary Public licensed in the state where the documents are signed. Most Escrow Officers have this license but Notary services can also be found at UPS stores, FedEx Kinko’s, banks, etc. Outside of the United States, the documents would have to be signed before an officer at a U.S. Consulate.

After all documents have been signed, the Escrow Officer forwards the documents to be recorded on to the title company with instructions to review and hold until further instructed. If there is a loan, the original loan documents are delivered to the lender for review. On the day of closing, after all conditions have been met and all the necessary funds are received by the closing agent, the title company is instructed to record. Once the conveyance document (ex: Statutory Warranty Deed) and/or security instrument(s) (ex: Deed of Trust) have been recorded, the Escrow Officer will disburse funds according to the Final HUD Settlement Statement. In Washington State, once the documents are recorded and funds are available for the seller, the transaction is considered “closed”. The parties are notified and the real estate agents usually coordinate getting keys to the buyer. 

Even after closing, there is still work to be done. If there were underlying Deeds of Trust paid off at closing, a Full Reconveyance must be recorded for each Deed of Trust. The escrow company may charge a reconveyance tracking fee in order to track the recording of this very important document.

This was a brief explanation but I hope you now have a better idea of what escrow is and what I do as an Escrow Officer.

For information on escrow accounts held with a lender for payment of taxes and/or insurance visit http://www.hud.gov/offices/hsg/sfh/res/respafaq.cfm

(The above information is not intended to be used as legal advice and pertains mostly to residential properties located in Washington State. If you have legal questions, please contact your Attorney. Of course, not all scenarios are the same and processes may differ from those explained above.)

Share this: