When A Deed Is Delivered by Escrow - dummies

When A Deed Is Delivered by Escrow

By Alan R. Romero

A grantor may effectively deliver a deed in the future by an escrow. An escrow is a deed (or other thing) given to a third party, called an escrow agent, to hold and then deliver to the grantee when specified conditions are met.

The parties may close a real estate sale by using an escrow agent. The grantor can give the deed to the escrow agent with instructions to deliver the deed to the grantee when the grantee delivers the purchase price to the escrow agent.

Likewise, the grantee can deliver payment to the escrow agent with instructions to give it to the grantor when the grantor gives the deed to the agent and the rest of the contract conditions are fulfilled, such as getting an acceptable title insurance policy.

The escrow agent also may manage the closing in other ways, like allocating expenses and recording documents. All of this makes closing easier and more convenient for the parties involved.

When a deed is delivered by escrow, it conveys title when the escrow conditions are met. Most would say that is true even if the escrow agent delays physically delivering the deed to the grantee. The parties may give the escrow agent written instructions detailing the conditions, or they may simply instruct the escrow agent to close the escrow when the conditions of the parties’ purchase agreement are met.

The escrow agent’s delivery to the grantee is said to relate back to the date that the grantor entrusted the deed to the escrow agent. That means that the grantor has effectively delivered the deed even if the grantor dies or is incapacitated before the conditions are fulfilled and the escrow agent delivers the deed to the grantee.

The delivery relates back to the grantor’s delivery to the escrow agent only when the following are true:

  • The buyer and seller have an enforceable contract of sale. Even if the parties have a contract, the delivery doesn’t relate back if the contract doesn’t satisfy the statute of frauds, unless written escrow instructions or other documents can satisfy the requirement of a writing.

  • The seller hasn’t reserved a legal right to take the deed back from the escrow agent. A delivery is essentially a final act by which the grantor gives up control of the property, so if the grantor can recall the deed from the escrow agent, he hasn’t really delivered the deed yet.

If these conditions aren’t met, the escrow agent’s delivery upon fulfillment of the conditions is still effective; it just doesn’t relate back to the grantor’s earlier delivery. That also means that up until the escrow agent delivers the deed to the grantee, the grantor can take the deed back from the escrow agent.

Up until closing, the escrow agent is an agent of both the grantor and the grantee. The escrow agent has a duty to both parties to perform its duties with reasonable care, skill, and loyalty. The agent must comply strictly with the parties’ joint instructions and is liable for damages from failure to do so.

If the parties disagree about whether the escrow conditions have been met, the escrow agent shouldn’t disregard one of the parties’ directions but instead should interplead the escrow, initiating a judicial action to have the court determine what the escrow agent should do with the deed and the purchase money.