Escrow

What It Means

Escrow is an arrangement in which a neutral third party — an escrow agent, title company, or attorney — holds funds, documents, or assets on behalf of the transacting parties until all conditions of a real estate contract are satisfied. In a home purchase, the escrow process manages the flow of money and documents from contract execution through closing.

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In co-buying, escrow serves the same function but with added complexity: funds arrive from multiple co-buyers, often from separate accounts, and must be tracked, verified, and applied correctly at settlement.

How Escrow Works for Co-buyers

Once a purchase contract is executed, the Earnest Money deposit is delivered to escrow. As the transaction progresses, the escrow agent coordinates document execution, manages contingency deadlines, and prepares for the final transfer of funds. At closing, each co-buyer's Cash to Close contribution is wired to the escrow account, and the agent disburses funds to the seller, lender, and other parties according to the settlement statement.

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The term "escrow" also refers to an ongoing escrow account maintained by the mortgage servicer after closing — used to collect monthly reserves for property taxes and homeowners insurance. For co-owners, these ongoing escrow payments are part of Shared Expenses and should be allocated in the Co-ownership Agreement.

Why It Matters for Co-owners

When multiple co-buyers are wiring funds to escrow, coordination with the escrow agent is essential. Title companies often have specific requirements for receiving funds from multiple accounts — including wire instructions, identification verification, and timing. Miscommunication or delayed wires from any single co-buyer can jeopardize the closing timeline.

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Co-buyers should confirm wire logistics with their escrow agent well before the closing date, ensure each party's contribution is clearly documented on the settlement statement, and verify that the post-closing escrow account is factored into the group's Shared Expenses allocation.

Key Points

• A neutral third-party arrangement that holds funds and documents until contractual conditions are met
• Manages the flow of money from multiple co-buyers during the transaction
• Earnest money, down payment contributions, and closing costs all pass through escrow
• Also refers to the ongoing account for property tax and insurance reserves after closing
• Multi-party wire coordination requires advance planning with the escrow agent
• Post-closing escrow payments should be included in the Co-ownership Agreement's shared expense allocation