What is escrow? The formal definition is “a deposit of funds or other instruments by one party for the delivery to another party upon completion of a particular condition or event.” You are probably wondering, so what is escrow? The best explanation that I received was to imagine you and a friend are making a bet and you ask another friend or third party to hold onto the cash until the wager is resolved.  Opening an escrow account when purchasing a home is comparable to this scenario.

When a home or property changes hands, the seller transfers the title and the buyer transfers funds to the escrow agent.  When all conditions of all agreements between seller and buyer have been met the agent provides the seller with the funds and the buyer or their lender with the property title. 

The purpose of escrow is to protect lender, buyer and seller.  The escrow holder is to protect the funds or documents while in their possession and until all conditions of the purchase agreement are met.  For buyer this can mean property repairs or clean-ups have been completed and for sellers it means your title is safe until you receive payment for your property.  All provisions of the agreement are written in the escrow instructions.

It is your responsibility to read and understand escrow instructions.  Ask your agent if you have any questions.  Respond quickly to any requests for funds or paperwork.