Who Decides Real Estate Escrow Disputes?

Who Decides Real Estate Escrow Disputes?
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Escrow is an important piece of real estate terminology for anyone buying a home. You'll first become familiar with the concept when you sign the purchase agreement and place your deposit into escrow, on the understanding that the money is kept safe and delivered to the seller only when the property transfer is complete, or when a contingency in the purchase contract is satisfied. Escrow monies are held by an escrow agent. If your transaction goes smoothly, he or she will do little more than hold onto the money until it is time to release it to the receiving party. This changes if things go wrong.

How Escrow Works

When money and/or documents are placed in escrow, both the buyer and seller agree to the conditions under which they are held, and when they can be released. It is not unusual for these conditions to be modified as a real estate transaction progresses, but the important point is that one party to the transaction cannot unilaterally change the conditions of escrow -- both parties must agree in writing.

Role of the Escrow Agent

The escrow holder is an independent person or company whose principle duty is to safeguard the funds and documents and to release them, or transfer title, only when all the escrow conditions are met. During the escrow period, the escrow agent will handle the escrow fund in accordance with his instructions, which might include paying bills from the money in his possession. Ultimately he will deal with the accounting procedures of closing, which include preparing the settlement statement, allocating funds and closing escrow.


It is not within an escrow agent's professional capacity to play any part in disputes arising between the buyer and the seller. The escrow agent is simply an intermediary, with no personal interest in the escrow money. He can give no advice about the merits of a particular dispute or claim. As escrow is conducted on the basis of a mutual instruction from the parties, if a dispute arises, the escrow agent cannot release the escrow money. At that point, the escrow enters a form of stasis.

Interpleader Action

If the parties resolve their dispute, the escrow agent can release the money in accordance with their mutual instructions. If the parties fail to reach agreement, the agent can file an "interpleader action," which allows him to lodge the escrow money with the court, and remove himself from all further dealings with the transaction. The court then decides what happens to the escrow money and documents. According to the escrow company Allison McCloskey, most disputes are thankfully resolved before an interpleader is filed.