Escrow is a broad term used most often in the real estate market. Technically, escrow is another word for trust and an escrow account can mean the same thing as a trust account. There is a Trustee for escrow accounts, and a variety of different rules can be attached to escrow in the same way. In Ohio and other states, however, escrow has come to define many of the processes that occur during a real estate transaction, when a property changes hands. This type of escrow has more definable regulations.
An escrow company is a third party involved in the real estate transaction. It handles most of the required documentation and recording that must occur for the sale to take effect. An escrow company acts as an overseer, coordinating the movements of the buyer, seller, lender and government bodies so that the title is conveyed to the right party, money changes hands at the right time, and all necessary steps are taken. Ohio law, like many states, allows title and escrow processes to be performed by the same company, since the two are so related.
Escrow closing refers to a particular type of closing where the escrow company ensures that the lender has transferred money into a trust, that the buyer has paid all required fees and that the seller has signed the necessary documents. The escrow company then checks to make sure there are no new liens, and records the deed to make the transaction official, ensuring as a last step that the seller is paid and that copies of documents are sent to all parties. In Ohio, lenders almost always require this type of escrow closing.
An escrow account is a particular kind of account that lenders may require as part of the mortgage process. These accounts are regulated by federal law and the specific standards of banks, so Ohio laws have little effect on them. Essentially, an escrow account collects extra funds that the borrower makes with the monthly mortgage payments. The lender then uses these extra funds to pay for property taxes, insurance and similar fees so the homeowner does not have to worry about them.
Ohio regulations stipulate a number of requirements for escrow settlements and the moving of escrow funds. Most are basic rules that keep the escrow process safe and effective. For example, all agencies that handle escrow must have an annual, independent review of their processes, and escrow accounts must be separated from any other funds handled by the agent at the same time.