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Escrow Closing
Practical Law Glossary Item w-001-5441 (Approx. 3 pages)
Glossary
Escrow Closing
A real estate closing where the parties to the transaction (the purchaser or borrower, the seller, and the lender (if any)) choose an escrow agent (typically a title company or an attorney) to close the transaction for them, without requiring any of the parties to be present. The escrow agent acts as a neutral third party between the parties.
In an escrow closing, the closing funds and documents are deposited with the escrow agent to hold pending the closing. On the closing date, when the parties confirm that all of the closing conditions have been satisfied, the parties authorize the escrow agent to:
- Assemble fully executed documents (if counterpart signatures were provided by the parties).
- Record the recordable closing documents and provide copies to the parties.
- Distribute the fully executed copies of non-recorded closing documents to the parties.
- Disburse the closing funds in accordance with the closing statement prepared by the parties to:
- fund the loan proceeds (if any);
- pay the balance of the purchase price;
- payoff any existing loans;
- pay for any closing costs; and
- pay any recording fees, transfer taxes or mortgage taxes.
In commercial transactions, the parties typically confirm the escrow agent's closing obligations in a letter countersigned by the escrow agent, commonly referred to as an escrow closing instruction letter. For a sample escrow closing instruction letter, see Standard Document, Escrow Closing Instruction Letter for a Commercial Mortgage Loan.