Commercial Escrow

TYPES OF ESCROW AGREEMENTS

The four most commonly used escrow agreements are:

  1. DEED AND MONEY ESCROW
  2. MONEY LENDER’S ESCROW
  3. STRICT JOINT ORDER ESCROW
  4. ARTICLES OF AGREEMENT (DOCUMENTARY ESCROW)

The DEED AND MONEY or sale escrow is used to document the closing of a real estate purchase whether the purchase is made with or without third party financing.  This escrow provides for the deposit of the deed of conveyance, funds to purchase the property, other documents which may be required to complete the transaction and specific instructions which set forth how and when the escrowee should act.  This is generally a two party agreement between buyer and seller. Two types of Deed and Money escrow agreements are currently in use. The standard Deed and Money which provides for disbursement after recording and later date – and to so called “New York Style” escrow which permits disbursement the same day.

The MONEY LENDER’S escrow is the vehicle through which a lender funds loan proceeds for the purchase of real property.  The funds are generally deposited along with various mortgage or security instruments.  The lender provides instructions detailing the conditions under which the funds can be disbursed.  This escrow is the most common.  These instructions, as a rule, provide only for deposits by the lender.

On SBA loans custom escrow instructions drafted to suit the transaction surround the lending to secure the business acquisition with real estate used as additional collateral. The real estate may be the land acquired with the business or the entrepreneur’s home, other real estate owned or all of the above. Upon execution of the documents and procurement of the other deposits into the escrow, disbursement of the loan funds occurs, followed by the recordation of the documents and delivery of the deposits to the appropriate parties.

The simplest form of escrow is the STRICT JOINT ORDER escrow.  This escrow generally provides for the deposit of a document or funds to be delivered upon the joint written direction of the parties.  This escrow is commonly used for the deposit of earnest money and for holding back money, for non-title relative problems. And is occasionally used for the deposit of a deed when the parties have entered into articles of agreement for deed.

The ARTICLES OF AGREEMENT (DOCUMENTARY ESCROW) is used to document the installment purchase of real estate.  It provides for the deed of conveyance to be held by the escrowee until such time all money due and owing the seller have been paid.  There is a form which is commonly used for this purpose.