In North Carolina, an escrow agreement is a financial agreement where a third-party, such as a law firm, controls payments between the buyer and seller and doesn’t release the funds until all the conditions of the contract are met. Escrow agreements are legally binding, and they are necessary when property is being bought and sold. In a residential real estate transaction, the third-party that holds the funds is always the closing attorney’s law firm, or simpler, the buyer’s law firm. The buyer’s law firm is referred to as the escrow agent.
An escrow agreement in a residential real estate transaction is spelled out in the Contract. It identifies certain things, such as the identity of the appointed escrow agent, how the money will be released, to whom, and when. Further, the contract needs to be signed by both the buyer and seller, and the funds need to be given to the escrow agent. When the escrow agent gets the funds, they have a duty to follow the escrow instructions, use good faith and reasonable skill, and redeliver the monies on the completion of conditions.
If you need an escrow agreement drafted, it is very important that you have an attorney draft it. A poorly drafted escrow agreement could lead to liability to the seller or the buyer. Please reach out to our law firm if you have any questions regarding escrow agreements for a residential real estate transaction.
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