A Helping Hand In Escrow

The function and purpose of an escrow agent seems to be inadequately understood by most of the buyers and sellers who use their services. We try here to cast some light on the subject.

First, it is important to understand the purpose of an escrow agent, because that affects everything that happens in escrow. The escrow agent is primarily, and always, a neutral stakeholder. We have to rely on the escrow agent to receive executed documents and money, and to record the documents and distribute the money when the transaction is ready to close.

The seller needs to know, when he delivers the deed to the escrow agent, that the deed will not be recorded until the escrow agent is able to disburse the purchase price to him. By the same token, the buyer needs to know that when he deposits his money in escrow it will not be paid over to the seller until the buyer has good title to the property.

The escrow agent does a lot more than that, but everything else is in the housekeeping details category. The escrow agent gives each party a closing statement detailing the charges and credits for that party. The closing statement is important when you prepare your 1040 return for that year. The escrow agent also prepares the 1099 forms, and where there is a withholding tax imposed by the state or federal government, the escrow agent collects that and remits to the tax office.

The many other details include ordering the termite inspection, ordering the survey, ordering the conveyance documents, ordering the title report, etc. Many people think the real estate agent takes care of these things, but actually it is the escrow agent who accepts the responsibility. He doesn’t want your closing to be delayed while you wait for those details to be attended to.

When there are no problems, everything goes smoothly and the escrow process appears deceptively simple. When problems arise, however, there is often a conflict between buyer and seller as to how to proceed. At that point, the escrow agent must remain neutral and ask the parties to intervene, and usually that means the parties’ lawyers have to be consulted. Where the lawyers are involved from the beginning the lawyers and escrow agent can usually resolve problems quickly, and often before they become problems.

A frequently occurring problem, for instance, is the judgment lien that the title report turns up that was recorded against someone who has the same or a similar name to that of one of the parties. We then have to establish that the judgment debtor is not the same person as the party to the escrow. Sometimes that is easy, sometimes not.

If the survey reveals that the boundary wall between the sellers’ parcel and the neighbors’ parcel deviates from the property line, we sometimes have a sticky situation that sometimes requires an encroachment easement, sometimes some other solution worked out by the lawyers on behalf of their clients. The possible problems are legion, but almost always solvable, if properly addressed.

Of course, the information in this article is general only. If you have more questions, we suggest you consult an attorney that practices real estate law.

©Poelman & Langa (808) 242-7222, 1129 E. Lower Main Street, #104, Wailuku, Maui, HI 96793