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An escrow is a process wherein the Buyer and Seller deposit written instructions, documents, and funds with a neutral third party until certain conditions are fulfilled. In a real estate transaction, the Buyer does not pay the Seller directly for the property. The Buyer gives the funds to an escrow company who, acting as an intermediary, verifies that title to the property is clear and all written instructions in the contract have been met. Then the company transfers the ownership of the property to the Buyer through recordation and pays the Seller. This process protects all parties involved.
The State of Arizona licenses and regulates all escrow companies. The Insurance Commissioner and the State Banking Department can inspect a company's records at any time, providing further oversight of the Company's management and position as an impartial third party to the transaction.
In Arizona, escrow services are generally provided by a title insurance company instead of an attorney. The stability, reliability and performance of your title and escrow company are vital to protect the interests of all parties to the transaction.
How is an escrow opened?
Once you have completed the contract (or Purchase Agreement) and the Seller has accepted the offer, your Realtor will open the escrow. The earnest money deposit and the contract are placed in escrow. As a neutral third party to the transaction, the Title/Escrow Company can respond only to those written instructions agreed to mutually by all "interested" parties (Seller and Buyer); The Title/Escrow Company cannot otherwise alter the contract or create instructions, and that protect all interested parties.
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