Escrow and Non-escrow States
In order to legally complete any real estate sale many states require all the involved parties to finalize the transaction by going through “escrow,” while other states use the “traditional” method of “closing.”
Georgia would be an example of a state that uses the traditional or non-escrow method for closing the real estate purchase. In the traditional closing buyers, sellers and any other involved parties meet face-to-face at a closing table at an appointed time in order to complete the transaction by signing all necessary documents. The transaction is completed as the property title changes hands along with any monies as part of the agreement’s funds disbursement for the lender or buyer. This transaction is referred to as “the closing,”
California by contrast is an example of a state that finalizes the real estate purchase using an escrow process. With this process the buyer, seller and any other involved parties reach a purchase agreement, which includes the “escrow instructions.” These instructions include all of the stipulations for the transfer of the property along with any funds to be disbursed, and all these being cleared and signed-off prior to the closing. During the escrow process, and prior to the completion and final signing of the purchase agreement, all important documents and funds are held “in escrow” by the assigned escrow agent until the time of the closing.
The escrow closing includes all documents and monies required to transact the loan. Escrowmay include any earnest money given to the buyer’s agent during the contract period, which may be applied to the closing costs or purchase price.
If all stipulations of the purchase agreement have been met according to the escrow instructions the closing is finalized with the signing of all documents and all funds being disbursed. The purchase transaction is complete. The finalizing of the escrow process is also referred to as the “closing of escrow,” and it usually does not require a final face-to-face meeting with all interested parties.