Requirements at Escrow Closing

At closing, an escrow officer acts in accordance with instructions from a buyer and seller.

Commonly used for real estate transactions, buyers and sellers use escrow services to safeguard funds and documents from changing hands until all requirements of the transaction are met. Aside from real estate, escrow is also used for the transfer of valued assets and the purchase of goods through online services such as eBay. The escrow officer requires instructions from the buying and selling parties for the disbursement of funds and documents to close a transaction and can only act in accordance with those instructions.

Purchase Agreement

One of the documents an escrow officer or closing agent requires at closing is the purchase agreement of the asset. It lists who is involved in the transaction -- buyers and sellers, real estate agents, commissions and lender, if applicable. The agreement provides a description of the asset for verification of a buyer's and seller's acceptance of price, closing date and other terms in order to process the closing.

Escrow Instructions

In order to close a transaction, an escrow officer requires the buyer, seller, lender and borrower to complete and sign the escrow instructions for the receipt and disbursement of funds. On the instructions, the escrow officer completes information stating the amount of monies to be deposited into escrow and by which party. The officer asks for the names of the people that the funds are to be disbursed to and on which dates.

Title Insurance

Escrow services are common for real estate transactions. Before an escrow officer can close the transaction and disburse funds, he needs to know that the property is free and clear of any liens through title insurance. The buyer purchases title insurance to verify that there are no unknown liens on the property or any unpaid taxes. It ensures the buyer and the lender that there are no problems with the property's ownership or history and protects the buyer from a loss in case of a property ownership dispute.

Other Requirements

The escrow officer requires a package of documents from the buyer and seller in order to close a transaction. The seller provides a deed for the escrow officer to record and transfer to the buyer. If applicable, the escrow officer requires the rent roll, lease assignments, tenant notices from the seller to provide to the buyer and any deposits or advances credited to the buyer. The seller also includes in the package, tax affidavits and form 1099-S from the IRS in order for the escrow officer to report the sale.

References

• EscrowHelp.com: What is the First of the Three Most Important Documents My Escrow Officer will Need?
• Real Estate and Mortgage Resources: Your Escrow and You
• Chicago Title: Sample Commercial Escrow Instructions
• The Money Alert: What is Escrow?

Resources

• "Department of Financial Institutions"; Consumer’s Guide to Title Insurance and Escrow Services
• IRS.gov: 2011 Instructions for Form 1099-S