Why are Escrows Entered Into? img

Why are Escrows Entered Into?

calender icon 5/3/2023    poster icon  Mark Goodman

Recently, we’ve been talking a lot about escrow and title insurance. In this article, we will explain the benefits of escrows and why escrows are entered into.

Title Objections

Sometimes we arrive at a transaction closing date before all of the title objections have been addressed by the parties, because title objections can often take time to resolve. In those circumstances the party who’s being insured is going to want some assurance against matters of title that affect the land. They want some guarantee that those things are not going to impair their insured interest.

Benefits of a 3rd Party Escrowee

When title objections are going to remain outstanding for some time following a real estate transaction, an escrow beneficiary will want to trust that the obligation to resolve those objectionable matters will be addressed and resolved without that party having to assume the risk in the event that proper resolution is not achieved. By utilizing a neutral third party escrowee (oftentimes a title company) to step in and hold the funds or documents sufficient to resolve an objectionable matter to ensure that it does get paid off, released, or otherwise resolved, a party’s concerns are alleviated.