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Escrow Accounts from Start to Finish

By Anna Parris Walker, Esq.

In these uncertain times for the real estate market, buyers and sellers find comfort in asking neutral third parties to serve as escrow agent.  Investors Title Insurance Company handles a variety of escrow accounts ranging from earnest money deposits to post-closing matters, mechanic's and materialmen's liens, and document escrows.  Over the years, the team at Investors Title has become expert at handling the escrow process from start to finish.

Opening an Escrow Account
The process for opening an escrow account with Investors Title is simple.  Parties provide Investors Title’s Commercial Services Division with the funds (or documents for a document escrow) and an agreement that outlines the terms under which the funds or documents are to be held and disbursed.  Funds can be sent to Investors Title by check or by wire, and the escrow agreement can be sent by email, fax, mail, or hand delivery. 

For earnest money escrows, the purchase contract can often serve as the escrow agreement, provided that it contains key terms:
(1) The tax identification number of the party earning interest on the account.  Generally, the party who provides the funds is entitled to earn interest on them.  For earnest money escrows, federal law (26 CFR 1.468B-7) requires interest to be attributed to the buyer, regardless of which party receives the principal at the close of the escrow. 
(2) Language requiring both parties to provide Investors Title with consistent written instructions for any disbursements from the escrow account.  These terms prevent Investors Title from making judgment calls as to which party is entitled to receive funds and help Investors Title retain its status as a neutral third party.
(3) Language indemnifying Investors Title from costs and/or liability, other than gross negligence. 

If the purchase contract or proposed escrow agreement does not contain the terms listed above, then Investors Title can provide the parties with a simple two-page escrow addendum to be incorporated into the contract.

Funds can be placed in money market bank accounts or in money market mutual funds with Investors Trust Company.  In general, mutual fund rates of return compare favorably to bank rates.  An Investors Title escrow addendum is required for mutual fund deposits.

As soon as the purchase contract or escrow agreement is in place and the funds are deposited, Investors Title sends formal notifications to the parties and their counsel.  To keep the parties informed at all times, Investors Title also sends notifications any time funds are added to or disbursed from the escrow account.

Closing an Escrow Account
To release funds or documents from escrow, Investors Title relies on the terms of the relevant contract or escrow agreement.  As noted above, these terms usually require the parties to provide Investors Title with consistent written instructions regarding the disbursement of funds or the release of documents.

If only one party provides instructions to disburse, Investors Title promptly seeks the other party's authorization to proceed.  Immediately after receiving consistent instructions from both parties, Investors Title releases funds by wire or by check to the appropriate parties.  Investors Title then notifies the parties and their counsel that the account has been closed.

Each escrow account has its own nuances, and the experienced team at Investors Title helps clients navigate any situation.  Please contact Anna Walker at awalker@invtitle.com or 919-945-2430 for more information.