CaseMark 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:
- Executed purchase agreement — price, deposits, contingencies, closing timeline, fee allocations, dispute resolution
- Party identification — full legal names, entity types, authorized signatories, notice addresses
- Property information — legal description, APN, street address (from title report)
- Financing details — loan amounts, lender identity, commitment letter status
- 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