Six Must-Know Escrow Facts: Know Your Rights
1. Escrow instructions should specify in writing how and under what conditions monies will be disbursed, especially if the transaction doesn't close.
2. Escrow is a fiduciary relationship but is limited to the duties involved in the escrow. The escrow agent is a trustee of both parties and is equally responsible to both parties for the administration of the escrow.
3. If a transaction fails to close as scheduled, monies may continue to be held in escrow provided there is no written demand from one party to cancel the contract. Monies are typically held after the closing date if a date to obtain the loan has passed but the parties still want to proceed with the transaction.
4. If the transaction is cancelled by either party, the agent holding the escrow monies shouldn't disburse any funds until all parties agree in writing how to disburse them.
5. If parties can't agree on how to disburse funds, the escrow agent may file an interpleader, which names all the parties that might have an interest in the monies and asks a court to decide how to disburse the money. Otherwise, an escrow agent may be obligated to keep funds indefinitely.
6. If a transaction is cancelled by the parties, real estate brokers and other third-party vendors may have first claim to escrow funds. That claim would depend on procuring cause.
To learn more about escrow accounts and how they are used in real estate transactions click here or call Only Closings at 203-581-1712.
(Source: REALTOR® Magazine, Mar. 2005).
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