Escrow instructions are written documents, signed by the parties, which directs
the escrow officer in the specific steps to be completed so the escrow can be
closed. Typical instructions would include the following:
- The method by which the escrow holder is to receive and hold the purchase
money 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 closing.
- The instructions and authorization to the escrow holder to disburse funds
for recording fees, title insurance policy, real estate commissions and any other
closing cost incurred through escrow.
- Instructions as to how insurance and taxes are pro-rated.
- Instructions to the escrow holder on the payment of prior liens and charges
against the property and distribution of the new 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.
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