What Are the Escrow Instructions?

March 25, 2024

Escrow transactions follow a strict process that spans weeks. Parts of it may be stressful for buyers and sellers alike, which is why escrow agents are an important source of support all the way through.

Each party needs to follow a strict set of rules in the time leading up to closing. If you don't fulfill your obligations or miss some of the steps along the way, the aftermath may turn into a lengthy conflict that could end in costly legal penalties.

That's why it's so important to read through the escrow instructions before making any commitment. These instructions will be outlined on paper, but we can give you some insight if you want to know more about them if you're already preparing the initial offer.

Escrow Agreements: Regulations, Terms and Conditions

Buyers and sellers agree on the escrow instructions at the start of the process, before the earnest payment gets transferred into the escrow funds.

The instructions are the terms and conditions listed in the escrow agreement, with real estate agents adding context when clauses are not clear. The contract shows all the requirements that both parties must fulfill before the funds are released, as well as the actions that would lead to mediation and/or the cancellation of the escrow process.

While you can't find two identical contracts, most of them follow similar structures, to the point that it's not hard to find templates available online.

• Keeping the escrow funds: Most of the instructions in the escrow agreement rest on the premise of the reimbursement of the escrow funds. At the seller's and buyer's agreement, a neutral third party holds the funds in the account until all the instructions are fulfilled.
  
  The contract outlines the different measures that the escrow holder needs to take if any of the parties fails to fulfill the instructions, including the possibility of requesting a court process if there are doubts about who's entitled to the money.


• Purchase price: It will include additional data regarding the buyer's mortgage loan, interest rates, closing costs, and payment deadlines. Sellers must transfer the total amount corresponding to the purchase price before the escrow funds are released.


• Preliminary reviews: This refers to all relevant documents and records, tracing back to previous property transfers. Sellers must make the property title available for inspection and respond to any faults or errors. These evaluations extend to other public records regarding the property's locations and market value.


• Property inspections: The buyers and real estate agents need to complete standard property inspections before closing with the seller doing their part to schedule the visits. If the inspection reveals specific structural issues, the sellers need to complete the necessary repairs before the follow-up appointment.
  
  If the seller is expected to include home improvement costs in the escrow funds (pest control, electric and plumbing repairs, furniture replacement), the instructions will state the amounts corresponding to these fees.


• Mediation period: Depending on the type of contract, there's a window of time for both parties to resolve any disagreement before the conflict is brought to court. In this case, the contract will state the number of days that will be allotted to mediation and the agents tasked with overseeing the process.


• Insurance policy: States the type of insurance that the property will be under and the obligation to secure its coverage before the closing date.

Closing details: At the end of the escrow agreement, there's the deadline for the closing, and additional details like time and place (all parties must be present to sign the contract and record the settlement). If the negotiations extend beyond this deadline, sellers, buyers, and realtors must unanimously agree on a new closing date.

Follow the Rules of Escrow and Ensure a Successful Closing

You deserve a smooth process without the added stress of rushing through deadlines. The specialists at Key Title & Escrow help you organize all your commitments leading up to the closing date so you can be done with your side of things with time to spare.

We understand the escrow instructions inside and out, so you can count on a knowledgeable ally to find the most effective way to fulfill your obligations. Moreover, we provide the support you need to resolve a dispute and other inconveniences. Our experts work hard to protect your investment and avoid financial loss.

Key Title & Escrow gives you everything you need, including a professional team and the most advanced technology to simplify the most tedious parts of the process. If you have questions before getting started, contact our specialists today and they'll be happy to assist you. Just call (305) 235-4571 or toll-free at (800) 547-0006. You can also send us a message via the contact form on this page and we'll get back to you in record time.

Looking for a Florida escrow company to assist you with your transaction? Key Title & Escrow will not let you down!