What Is An Escrow Transaction?

Real estate escrow is a type of closing procedure in which a deed is delivered by a grantor to an escrow agent who is directed to deliver the deed to a grantee when specified conditions are met. These specified conditions are more often than not contingent on the purchasing amount being delivered to the agent. An escrow closing differs from a conventional closing only in that the buyer and seller do not ever have to meet face to face. The other elements, a written contract, delivery of deed, and delivery of payment, are done in the same way as under a conventional closing.


The agent managing escrow acts as a go between for the buyer and seller for a fee. When a buyer and seller enter into a real estate escrow transaction, they enter into a contract, in which a specific sum of money is paid for a specific piece of real property. The two parties then appoint an agent for escrow, such as a bank.

The real estate escrow process may also be used to exchange deeds to real estate. There are several advantages and disadvantages to escrow closings. If an individual owns a lot of property and they are constantly buying and selling property as part of a business, then an escrow agent is very convenient. The agent attends all the meetings, presents offers and counter offers, and finally performs the actual transaction, all while the buyer and seller never have to meet. The escrow transaction has a higher success rate because an independent third party is performing the transaction.

This protects both the buyer and the seller from either one changing their mind. Of course, this could also be a disadvantage if at the last minute the seller discovers something more valuable in the property than previously known, such as oil or other valuable natural resources. In order for a real estate escrow to be valid, there must be a valid deed, an enforceable contract, delivery, and an escrow agent. A deed is valid if it is executed properly, abides by all local and state laws, and is ready to be surrendered once the agent managing escrow has obtained the money. The deed does not have to include the name because the escrow agent may write it in at any point. An enforceable contract is usually a purchase agreement. Without the purchase agreement, either party can stop the transaction at any time. There also must be a written memorandum for the contract to comply with the statute of frauds. Delivery is a term used through the escrow process.


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