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WHAT HAPPENS IN ESCROW? An escrow is an arrangement in which a disintegrated third party, called an escrow holder, holds legal documents and funds on behalf of a buyer and seller, and distributes them according to the buyer's and seller's instructions. People buying and selling real estate often open an escrow for their protection and convenience. The buyer can instruct the escrow holder to disburse the purchase price only upon the satisfaction of certain prerequisites and conditions. The seller can instruct the escrow holder to retain possession of the deed to the buyer until the seller's requirements, including receipt of the purchase price, are met. Both rely on the escrow holder to carry out faithfully their mutually consistent instructions relating to the transaction and to advise them if any of their instructions are not mutually consistent or cannot be carried out. An escrow is convenient
for the buyer and seller because both can move forward separately but
simultaneously in providing inspections, reports, loan commitments and
funds, deeds and many other items, using the escrow holder as the
central depositing point. If the instructions from all parties to an
escrow are clearly drafted, fully detailed and mutually consistent, the
escrow holder can take many actions on their behalf without further
consultation. This saves time and facilitates the closing of the
transaction.
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