What is Escrow and Why is it Needed? By, Mark Spurbeck

People looking at a house

Escrow does what?

Escrow is an arrangement in which a neutral third party (the escrow agent) assembles and processes all the components of a real estate transaction (including legal documents), records the transaction, and ultimately, disburses funds according to the buyer’s and seller’s instructions.

Both the buyer and seller rely on the escrow agent to carry out 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. If the instructions from all parties to an escrow are clearly drafted, the Escrow Closer can take many actions on behalf of the buyer and seller without further consultation. This saves much time and facilitates the closing of the transaction.

Typical roles in the Escrow process

The Escrow Agent
-Obtains the order for title insurance.
-Obtains approvals from the buyer(s) on pest inspections, the commitment for title insurance, and any other inspections that are called for in the Purchase and Sale Agreement.
-Obtains any required payoffs/release documents to clear title.
-Receives funds from the buyer and/or lender.
-In most cases, prepares vesting document and excise tax affidavit on seller’s behalf.
-Prorates insurance, taxes, rents, etc.
-Prepares a final statement (often referred to as the “HUD Statement” or “Settlement Statement”) for each party, indicating amounts paid in conjunction with the closing of your transaction.
-Oversees the signing of your loan documents.
-Forwards deed to the county for recording.
-Once the proper documents have been recorded, the escrow agent will disburse and distribute funds to the proper parties.

The Seller/Agent
-Delivers a fully executed Purchase and Sale Agreement to the escrow agent.
-Executes the paperwork necessary to close the transaction.
-Deposits evidence of pest inspection and any required repair work, per the Purchase and Sale Agreement.

The Buyer/Agent
-Deposits funds required to close (in addition to the purchase price) with the escrow agent.
– Approves any inspection reports, commitment for title insurance, or other items as called for by the Purchase and Sale Agreement.
-Fulfills any other conditions specified in the escrow instructions.

The Lender (when applicable)
-Deposits proceeds of the loan.
-Directs the escrow agent of the conditions under which the loan funds may be used.

In Summary

Some responsibilities of the Escrow Closer:
-Process and coordinate the flow of documents & funds.
-Keep all parties informed of progress to the escrow.
-Respond to lender’s requirements.
-Oversee signing of loan/closing documents.
-Obtain approvals of reports and documents from the parties as required.
-Prorate and adjust insurance, taxes, rents, etc.
-Record the deed and loan documents.
-Prepare a final statement outlining funds received and to be disbursed in conjunction with your transaction. Escrow is the process that assembles and processes all the components of a real estate transaction. The transaction is officially closed when the new deed is recorded, thus transferring ownership from the seller to the buyer. The escrow agent is a neutral third party acting on behalf of the buyer and seller under the guidelines set forth by the State of Washington Department of Financial Institutions.

Your partner in success of others…strategy in action!


Mark Spurbeck
Fidelity National Title
SVP ~ Strategic Accounts
[email protected]


View Mark’s post on Why you need title insurance