Escrow instructions are written documents, signed by the parties giving them, which direct the escrow officer in the specific steps to be completed so the escrow can be closed.
- The method by which the escrow holder is to receive and hold the purchase price to be paid by the buyer.
- The conditions under which a lapse of time or breach of purchase contract provision will terminate the escrow without a closing.
- The instruction and authorization to the escrow holder to disburse funds for recording fees, title insurance policy, real estate commissions and any other closing costs incurred through escrow.
- Instructions as to the proration of insurance and taxes.
- Instruction to the escrow holder on the payment of prior liens and charges against the property and distribution of the net sale proceeds.
- Since the escrow holder can only follow the instructions as stated, and may not exceed them, it is extremely important that the instructions be stated clearly and be complete in all details.
The method of dividing the charges for the services performed through escrow or as a result of escrow varies from place to place. The fees and service charges to be divided might include, for example, the title insurance policy premium, escrow fee, any transfer taxes, recordation fees and cost in connection with any loan being obtained. Unless there is some special agreement between the buyer and seller as to how these charges are to be paid, local custom will generally be followed in drafting the instructions to the escrow holder as to how they are to be divided.
Once all the terms and conditions of the instructions of both parties have been fulfilled, and all closing conditions satisfied, the escrow is closed and the safe and accurate transfer of property and money has been accomplished.