Escrow is usually necessary whenever there is a purchase of real property because there is a deposit that accompanies the offer. The deposits are never given directly to a Seller to keep prior to a closing. The deposits are given to an Escrow Agent. Some real estate offices have their own escrow accounts. Some have a title agent or title attorney they are affiliated with that provides them escrow services. Sometimes the Buyer’s attorney offers escrow services as we do at TBS LAW, PA.
Escrow money is money collected on behalf of another person, usually a client, to be held on their behalf for a time certain and for a specific reason. Most escrow deposits are collected for closings that are set to happen in the future and when both the Buyer and Seller accomplish everything they agreed to the money is then released. Escrow agents also provide Letters of Confirmation as to the deposits collected for all interested parties.
All escrow deposits need the same amount of time to clear if the deposits are made with a check. Even bank checks, certified checks and money orders have a certain amount of days required for funds to clear and become liquid. All funds for closing must be liquid on the day of closing in order to disburse the funds pursuant to the Closing Disclosure Statement or HUD-1. All Buyers should wire funds when there is not enough time for the funds to properly clear prior to the closing.