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Escrow Agreement Template
What Is an Escrow Agreement?
An Escrow Agreement is a document that outlines the intention of two parties to deposit assets with a third party. Once the terms and conditions of the contract between two counterparts are met, the third party, called an escrow agent, delivers indicated assets to one of them. For example, an individual wishes to purchase an apartment. To do so, they put a deposit with the escrow agent to make sure that before the agreement between them and the current apartment owner is signed, this real property does not change hands until obligations listed in the Escrow Agreement Form are followed through.
Alternate Name:
- Escrow Contract.
Since the deposit is given to a trusted and neutral third party, the purchaser does not have to worry - even if the deal falls apart, an Escrow Agreement to hold funds still commands the agent to give the money back to the buyer. The seller, in turn, can be sure that the buyer is actually interested in the property in question and will make sure the deal is done quickly.
An Escrow Agreement template can be downloaded below or you can compose your own document using our online form builder.
What Is the Purpose of an Escrow Agreement?
Draft an Escrow Agreement to reduce the risk of fraudulent actions by entrusting the money to a reliable escrow agent. It is indispensable in business deals that require assurances that one party will fulfill its contractual obligations and only then the other party will pay money for the goods. This document is commonly used in the securities sector to deliver stock and in real estate deals to allow the purchaser to perform due diligence and assure the seller that the buyer will be able to pay for the house or apartment.
There is no other contract that will offer this kind of assurance to concerned parties - it provides the seller and buyer with security - no counterpart wants to lose their property or money, so a trusted agent is necessary to make the transaction as smooth as possible. The parties choose the bank to open an escrow account and the buyer puts their money in this account. When the parties notify the agent that the transaction obligations are completed, the agent gives the money to the seller.
How to Make an Escrow Agreement?
Follow these steps to create a proper Escrow Agreement:
- Identify the parties to the contract - the seller, the buyer, and the agent. The three-party agreement is the acceptable Escrow Agreement format. Add full names of the parties, their mailing addresses, and telephone numbers.
- Indicate the intention of the parties to enter into the escrow agreement for the sale and purchase of certain assets. Describe those assets - if it is a real estate, add its precise location.
- Confirm that the seller and purchaser have appointed the agent to hold a certain sum of money until the purchased property is adequately delivered - the seller must deliver the goods, and the buyer pays for them.
- Outline the responsibilities of the agent. This individual or company agrees to hold the funds and release them when two other parties give them the authorization to do so.
- Decide who will bear the costs of the transaction. Usually, the agent bears no costs, and the seller and purchaser divide the expenses between themselves.
- State where the escrow funds are located. It is recommended to deposit them into a bank account. The agent is not allowed to join their personal funds with the escrow funds.
- Write down the fee the agent is entitled to receive. You may give the agent the right to deduct fees from the escrow amount before this money is disbursed.
- Describe the notification process. Once the agent receives a letter from two other parties that contains instructions for the disbursement, it is their duty to release the funds.
- Certify you have read and understood the contract, sign, and date it.
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