What is an Escrow Service?
Escrow is a service that provides a means of security in the handling of
important property, funds, and documents. An escrow holder works with the
Buyers, Sellers, Lenders and Borrowers ("the principals") involved in a
transaction to assure funds and documents change hands at the appropriate point
in time, after preset conditions have been met.
After the principals agree upon an escrow holder, the group must provide the
holder with a set of written instructions, mutually agreed upon by all
parties. The escrow holder then holds onto all important documents and funds
until the written conditions are met for dispersal of these items. When all
contingencies of the escrow instructions have been met or achieved, the
escrow will be closed. This removes the risk of a party either taking
payment without providing a service or goods, or the risk of a provider not
being paid for their service.
If conditions of the escrow contract cannot be met , the funds held will not
be disbursed to the seller and can be given back to the buying party. If
there is a disagreement as to whether contract conditions have been
fulfilled, an arbitration service must judge the contract according to the
contract to determine who the funds belong to.
Escrow Closing Costs
The costs incurred in any escrow transaction are controlled by many
factors and depend upon the type of transaction and conditions involved.
Many fees are considered customary while others are charged based on your
particular transaction. The escrow company has no control over the costs
charged by other services such as title insurance, recording fees, lender's
The escrow fee is normally based on the size, complexity, liability
assumed and the cost of producing the service. It may be necessary to charge
additional fees for extra or unusual services performed during the course of
your escrow. Upon request, your escrow officer will be able to provide you
with an estimate of our costs as well as those costs charged by others,
provided such information is available.
What About Escrow Cancellation?
No escrow is opened with the intention of canceling, but there are
occasions when a transaction fails to close due to contingencies that cannot
be met or when the principals disagree during the course of the escrow.
Cancellation of an escrow is provided for in our Additional Escrow
Conditions and Instructions.
Instructions for cancellation of the escrow and distribution of any funds
deposited in escrow must be given to the escrow holder in writing. As with
any other instruction, these instructions must be mutually agreed to by the
principals. The escrow holder will take the position that no funds on
deposit can be refunded until the escrow holder is in receipt of the
MUTUALLY executed cancellation instructions. Without these instructions the
escrow holder cannot make a determination as to who is the "rightful" party
and therefore cannot return the funds or documents.
Sometimes, when a dispute exists, the escrow holder may be forced to
allow a court to decide which party is entitled to certain documents or
funds; this is called an Interpleader Action. Fortunately, most disputes are
resolved before this action is taken, as the costs for such legal actions
are extreme and are usually paid out of the funds on deposit in escrow.
iGolder offers a free service named Safetransit™.
This service allows both parties to upload conditions prior making a trade
and defer the payment until the conditions have been fulfilled.