What Happens In Escrow

Mar 5, 2018

What Happens in Escrow?

An escrow is an arrangement in which a neutral third party, called an escrow holder or settlement agent, holds legal documents and funds on behalf of a buyer and seller, and distributes them according to the buyer’s and seller’s instructions.

How it Works

People buying and selling real estate often open a sale transaction with the settlement agent for their protection and convenience. Often times, this takes place at a title company. The buyer can instruct the settlement agent to disburse the purchase price and other reimbursement for transaction expenses. The seller can instruct the settlement agent to retain possession of the deed to the buyer until the seller’s requirements, including receipt of the purchase price, are met.

Both rely on the settlement agent to carry out faithfully their mutually consistent instructions relating to the transaction, and to advise them if any of their instructions are not mutually consistent or cannot be carried out. If both parties are working with a title company, they will receive a settlement statement prior to closing to review so they can make sure all funds are being dispersed according to agreement prior to closing.


Title Companies provide professional escrow settlement services that are a convenience for both the buyer and seller because both can move forward separately but simultaneously in providing inspections, reports, loan commitments and funds, deeds and many other items, using settlement as the central depositing point. If the instructions from all parties to the transaction are clearly drafted, fully detailed, and mutually consistent, the settlement agent can take many actions on their behalf without further consultation. This saves time and facilitates the closing of the transaction.

The settlement process was developed to help facilitate the sale or purchase of your home. The settlement agent accomplishes this by:

  • Acting as the impartial “stake-holder,” or depository of documents and funds
  • Processing and coordinating the flow of documents and funds
  • Keeping all parties informed of progress on the escrow
  • Responding to the lender’s requirements
  • Securing a title insurance policy
  • Obtaining approvals of reports and documents from the parties as required
  • Prorating and adjusting insurance, taxes, rents, etc.
  • Recording the deed and loan documents
  • Maintaining security and accountability of monies owed and owing

Your Real Estate representative will help you draft the agreement for the purchase of your property and find a title company or other settlement agent to handle your transaction. These professionals will act as go-betweens to help you understand the process. Call us at Smith and Crisp today to get your home search started!