Escrow is one of those words that most people don’t encounter often outside of real estate. Simply put, in a real estate transaction, escrow is a neutral third party where the buyer places their funds for the purchase, and the seller places the necessary documents to transfer ownership. This process ensures that both parties are protected from potential fraud. In Oregon, the title companies that handle the title search and title insurance also provide escrow services. Escrow officers can only release funds or documents if they receive matching instructions from both the buyer and seller.
In a typical Portland real estate transaction, the escrow account is opened with the buyer’s earnest money deposit (covered in another blog post). Once an offer has been accepted, the buyer usually has three business days to submit the earnest money by check or wire transfer to the agreed-upon title company. In addition to the earnest money, the buyer’s down payment and loan funds are deposited into escrow before closing so that everything is ready for disbursement on the closing date. The deed showing the transfer of ownership is also placed in escrow. Once the escrow officer has all the necessary documents and funds and has clearance to record, the new deed is sent to the county for recording, and the seller’s proceeds are released by check or wire transfer.
Think of escrow as a safe zone for funds and important documents in a real estate transaction. It protects both parties and provides a critical service.
There’s also a second type of escrow account related to real estate. A budget mortgage includes an escrow account managed by the mortgage company for the borrower’s annual property taxes and insurance premiums. The homeowner contributes to this account through monthly mortgage payments, and the lender uses the funds to pay those annual expenses. This account is adjusted from time to time as property taxes or insurance costs change.
Hope you found this helpful! If you have any questions about escrow, don’t hesitate to reach out.
