You may have heard the terms escrow and escrow agent many times regarding real estate but might not know exactly what they mean. Escrow is a legal term that relates to funds that are deposited into a specific type of account under the trust of a neutral third party until the completion of a contract that has monetary value. The neutral third party is known as an escrow agent or escrow officer, which is a licensed and bonded person or entity with no other interest in the transaction other than to manage the disbursement of funds in a timely manner. In Florida, attorneys and title companies most notably provide escrow services.
Escrow Account Fundamentals
An escrow account is created and held solely for the purpose of holding funds in a pending transaction and disbursing them to the appropriate parties in a timely manner when required to do so. The purpose of an escrow agent is to ensure that all conditions of the transaction are met before the funds or assets are released to the appropriate party.
In a real estate transaction, the buyer deposits the purchase funds with an escrow agent while waiting for the seller to transfer the title. Once all terms of the agreement are fulfilled, such as inspections, repairs, and paperwork, the escrow agent releases the funds to the seller, facilitating a smooth and secure transaction for both parties.
If you are a homeowner, another example of a real estate escrow account is the account a mortgage lender uses to accumulate reserves and distribute funds for payment of taxes and insurance.
Escrow agents play a critical role in real estate transactions and act as intermediaries between buyers and sellers, and all other interested parties. They have no interest in the transaction except for the proper collection, safekeeping, procedure, and disbursement of funds. Duties often include but are not limited to examining legal documents, executing closing documents, and making payments to lenders and taxing authorities. They help build trust between parties by ensuring that neither party is at risk of being cheated or disadvantaged during the transaction process.
At the Law Office of Donna Hearne-Gousse, we are a fully licensed, insured, and bonded attorney-based title company with full escrow services. We invite you to contact us for more information regarding closing and escrow services as well as all areas of real estate law.
The Law Office of Donna Hearne-Gousse
(561) 582-5670