casemark/escrow-instructions

Residential Real Estate Escrow Instructions

Drafts escrow instructions governing an escrow agent's receipt, holding, and disbursement of funds and documents for a residential real estate closing.

Quick Start

Gather before drafting:

1. Executed purchase agreement — price, deposits, contingencies, closing timeline, fee allocations, dispute resolution
2. Party identification — full legal names, entity types, authorized signatories, notice addresses
3. Property information — legal description, APN, street address (from title report)
4. Financing details — loan amounts, lender identity, commitment letter status
5. Title report — exceptions, existing liens, payoff requirements

Core Workflow

Draft the following sections in order.

1. Recitals & Party Identification

• Parties: full legal name, entity type + jurisdiction, notice address
• Authorized representatives: name, title, authority basis
• Property: complete legal description, APN, street address
• Transaction summary: purchase price breakdown (earnest money, additional deposits, loan proceeds, cash at closing)
• Incorporated documents: title, date, parties for each; attach as exhibits
• Conflict priority: escrow instructions control agent duties; purchase agreement controls substantive buyer/seller rights

2. Escrow Agent Authority

• [ ] Agent as neutral stakeholder with purely ministerial duties
• [ ] No duty to inquire into transaction validity or signatory authority
• [ ] Authority from written instructions only; no oral modifications
• [ ] Confidentiality obligation except as required by duties or law
• [ ] Designated contacts, authorized instruction-givers, acceptable communication methods
• [ ] Joint vs. unilateral instruction requirements (specify which actions)

3. Deposit Mechanics & Fund Safeguarding

For each deposit specify: exact amount, form (wire/cashier's check with details), deadline from triggering event, triggering condition for subsequent deposits, non-payment consequence (cure period, termination rights).

Fund safeguarding:

• Segregated account, never commingled
• Interest-bearing status and allocation per state law
• Written confirmation within 1 business day of receipt
• Ledger of receipts/disbursements; accounting available on request
• Dishonored payment: immediate notice, cure period if applicable

4. Conditions Precedent

For each condition specify: responsible party, deadline, evidence of satisfaction, failure consequence.

Typical conditions: marketable title, physical inspection, financing, appraisal, HOA/estoppel documents.

Include:

• Waiver — written notice to agent and all parties; partial vs. complete
• Deemed waiver — no written disapproval by deadline = waiver
• Failure allocation — buyer-caused → seller gets deposits; seller-caused → buyer gets deposits; no-fault → return to depositor

5. Closing Sequence & Document Exchange

Closing date: specific date or mechanism (e.g., "5 business days after satisfaction/waiver of all conditions").

Seller deposits: grant deed (recordable form), bill of sale, assignment of contracts, title affidavit, FIRPTA affidavit or state withholding certificate, transaction-specific documents.

Buyer deposits: closing funds (balance of price less deposits plus buyer's costs), deed of trust/mortgage, assumption agreements, closing affidavits.

Define "closing": recordation of deed, disbursement of funds, or release of documents. Specify recording order and confirmation procedure.

Settlement statement: draft to parties at least [X] business days before closing; itemize all receipts, disbursements, prorations, adjustments.

6. Prorations, Adjustments & Fee Allocation

Proration date: closing date. Method: 360-day year or actual days.

Prorate: real property taxes (address supplemental bills), special assessments (confirmed vs. pending), HOA dues, rents/security deposits, utilities.

Fee allocation per purchase agreement; local custom governs unaddressed items. Common items: escrow fee, owner's/lender's title policies, recording fees (deed = seller; deed of trust = buyer), transfer tax, survey, home warranty, HOA transfer fee, NHD report.

7. Termination & Dispute Resolution

Triggers: mutual agreement, condition failure not waived, material breach, operation of law.

Procedure: written notice to agent + all parties citing specific provision. Funds follow condition-failure allocation. Documents returned to depositor. Cancellation fees per agreement.

Conflicting claims: agent holds funds → 30-day negotiation → interpleader if unresolved (no further notice required).

Agent protections: no liability for good-faith reliance on written instructions; no duty to act without joint instructions during disputes; joint/several indemnification by parties for agent's costs; right to deduct from escrowed funds; resignation on 10 business days' notice with successor by mutual agreement.

8. General Provisions

Governing law: property state. Venue: property county. Amendments: written, by all three parties, no oral modifications. Severability. Counterparts. No presumption against drafter. Entire agreement supersedes prior escrow understandings. Notices: written, to designated addresses, via specified methods.

9. Signature Blocks

• Individuals: signature, printed name, date
• Entities: signature, printed name, title, date, entity acknowledgment
• Escrow agent: separate acceptance section
• Notarization: include if required by state law

Pitfalls & Checks

• Jurisdiction: verify state escrow account requirements (e.g., California Financial Code §17000 et seq.) and interest allocation rules
• FIRPTA: always include withholding certificate or affidavit; omission creates buyer liability (IRC §1445)
• Transfer tax: rates and payor customs vary by state and county — confirm local practice
• Supplemental taxes: some states (e.g., California) issue supplemental bills on reassessment — allocate explicitly
• Recording order: deed before deed of trust; subordination agreements in correct sequence
• No placeholders: flag missing information as targeted client questions rather than inserting brackets
• Cross-reference: verify all amounts, dates, names, and defined terms match the purchase agreement
• Table of contents: include if instructions exceed 10 pages