What Is Escrow?

In a real property transaction, it is the delivery by the buyer and seller of legal instruments and money to a third person who completes the transaction in strict accordance with the instructions of the parties.

Why Use An Escrow?

Escrows provide a mechanism to assure safety and convenience in carrying out the provisions of an earnest money agreement, and to assure that the rigid body of rules peculiar to real property transfers is carefully observed.  An escrow placed with a member of the Oregon Land Title Association provides:

(a)      An impartial custodian who holds the funds and documents and makes concurrent delivery of the transfer documents to the buyer and the purchase money to the seller at the moment when the terms and conditions of the transaction have been performed;

(b)      a “clearinghouse” for the payment of all liens and other encumbrances;

(c)      a trained agent who performs all details in prorating and adjusting accounts between the parties, and assumes responsibility for the many ministerial tasks involved in closing.

Who Can Act As An Escrow Agent In Oregon?

Escrow Agents licensed by the State of Oregon.  Attorneys, Banks, Savings and Loan Associations, Trust Companies, Mortgage Brokerage Firms may act as escrow agents under certain circumstances and as authorized by law. 

Why Do Title Companies Provide Escrow Service? 

The function of the escrow agent is very closely related to title examination.  The buyer will usually demand a preliminary title report prior to depositing his funds.  The buyer’s instructions will enumerate the exceptions or encumbrances allowed to remain on the property at closing.  To assure compliance with the buyers’ instructions the title company must re-examine the records of title at the time of closing and, as escrow agent deliver the necessary title insurance policies and documents, and disburse the funds.

When an escrow is placed with the title company, the control of title documents and records is centralized under “one roof.”  The escrow agent has the complete facilities of the title plant at his fingertips. 

What Services Does An Escrow Agent Perform? 

  •     prepares the necessary instructions from the buyer and seller   and receives the necessary documents and funds.
  •     pro-rates interest on liens to be assumed.
  •     pro-rates rent.
  •     pro-rates taxes
  •     pro-rates and obtains endorsements of existing fire insurance  policies when requested by a lender or a party to escrow.
  •     clears checks deposited by purchaser through banking channels
  •     obtains title insurance for protection of buyer and lender.
  •     closes transaction when instructions of buyer and seller can be satisfied by recording legal documents and disbursing funds.
  •     pays liens and costs authorized by parties.
  •     furnishes each party  with a closing statement showing disposition of funds in the transaction. 

Who Pays Escrows Fees? 

The escrow fee is usually split between the buyer and seller, but this can be changed by agreement of the parties.

How Does The Seller Benefit From An Escrow? 

The seller is assured that the transaction will be properly and promptly closed.  Specially trained personnel will see that every detail of the instructions are carefully followed, and that title will not pass to the buyer until the purchase price is fully paid, or the seller’s provision as to security for unpaid balances is fulfilled.  If the seller intends to use part of the purchase price to satisfy liens on the property, the escrow provides an efficient method for paying off the lienor. 

How Do Others Benefit From An Escrow? 

Real estate brokers, attorneys, and lending institutions, among others, confidently use the escrow as a sure method for coordinating many of the details in a real property transaction.  The reliability of your title company, as escrow agent, creates a team with these specialists to effect a smoother, more efficient and timely closing.                           

How Does The Buyer Benefit From An Escrow? 

The buyer is assured that the transaction will be closed in accordance with buyer’s instruction, and that the funds will not be paid to the seller until the transaction is properly completed.  If the buyer needs to use the property as security for a loan to pay part of the purchase price, the escrow guarantees the lender that title is exactly as required, and provides a safe method for delivery of loan proceeds or security documents. 

Are Escrow Records Kept? 

Yes:  the information in the file pertaining to the transaction will be available for a minimum of six years after closing.  Escrow information is always kept in the strictest confidence. 

How Can I Assist the Escrow Agent in Closing? 

The escrow agent should be furnished with:

Usually, most of this information will be stated in the earnest money agreement, a signed copy of which should be furnished to the escrow agent.