Escrow is a legal arrangement in which funds or other tangibles are deposited into an escrow account under the trust of a neutral third party (escrow officer or agent) pending completion of contracted contingency or condition. Escrow is a way of transferring or exchanging property and/or money using a third party who has no other interest in the transaction other than to handle the details of who gets what. Escrow is most commonly associated with real estate transactions. Entities providing these services include title companies, mortgage lenders, attorneys, the escrow divisions of some real estate brokerage companies, independent escrow companies, and banks and savings and loan institutions.

Escrow Account

This is the account is where the funds or items of value are deposited and held for later payments or disbursements. This account is created and held solely for this purpose and must not be accessed for any other use. In real estate this account is for the purpose of folding funds needed to close.

A common type of real estate escrow account is the one used by a title company to hold the down payment or earnest money for a home purchase contract until the sale closes, or in order to refund the appropriate amounts if the sale does not close. When all necessary documents have been received, reviewed and signed by the escrow officer who is satisfied that everything is in order, the funding of your loan is requested and the transaction is ready to close. Upon closing funds are then disbursed from this account in an agreed upon manner.

Another example of a real estate escrow account is the account a mortgage lender uses to accumulate reserves and distribute funds for payment of taxes and insurance. This is your lender's way of making sure that these things get paid in a timely manner. Your lender will perform an analysis every year to make sure they are collecting from you the correct amount of money for the actual or anticipated expenses, collect these amounts as a portion of monthly payments or as a lump sum amount you are notified must be added to the account, and then pays the expenses from this account. Sometimes a property will be notified that there is not enough money currently on deposit in the escrow account and is advised of an increase in their monthly payment. This is usually due to an actual increase in property taxes or insurance, but can also be an extra amount demanded by the lender to cover anticipated future increases.

Escrow Officers

Escrow officers act as intermediaries between buyers and sellers. Their duties can include examining legal documents such as deeds, liens, mortgage notes, tax certificates and contracts, and execution of closing instructions or compliance with contract conditions, payment of taxes and payoffs of existing mortgage liens. The essence is the collection and distribution of funds to and from the appropriate parties, and issuance of title insurance. Escrow officers work and communicate with lenders, sales agents, buyers, sellers, insurance companies, and many more entities involved in transactions. Escrow officers may be paid by salary, salary with bonus, or strictly on commission. In many locations there are no formal education requirements for a career as an escrow officer, but most begin as assistants and will take courses in business or real estate along the way to increase opportunities for advancement and to be more prepared for working directly with clients.

Article Source: http://www.realestateinvestmentarticles.net