How Do You Terminate an Escrow Agreement?
January 16, 2024It takes a lot of thought and planning to embark on a real estate transaction. Even people who've navigated the process in the past take the time to weigh in their options before signing an escrow agreement. You may feel like you understand all there is to know about the process going in, and yet, some things could still take you off guard. No one would say it's out of line to feel uncomfortable after finding flaws in the property title or just by having poor communication with the other parties involved.
Today, we go over what to do if you no longer feel at ease with your transaction and wish to terminate your escrow agreement.
A Close Look into Escrow AgreementsAn escrow agreement is an essential document in every real estate process. It serves as a contract in which buyers and sellers agree to fulfill a number of obligations before the closing date. After the contract is signed, an escrow agent oversees the transfer of the funds to the escrow account.
As explained in a piece by FasterCapital, the legal nature of escrow agreements can bring the reassurance that clients need during complex transactions. The document itself shows that there are contingencies in place when conditions aren't met and legal repercussions for those who fail to follow said conditions.
Of course, this also makes things particularly challenging if one wishes to end the transaction.
The main clauses in an escrow agreement are meant to protect the funds in the escrow account, usually stating that these funds won't be granted to the correct parties until the conditions are fulfilled. The sudden termination of an escrow agreement could potentially leave things in the air regarding the money that's being withheld.
This is, however, unlikely when the agreement is properly drafted, as there would be regulations to deal with disputes, delays, and terminations.
Terminating an Escrow AgreementFrom the previous section, you can probably guess the first step in the termination process. You need to look back at the escrow agreement to see the clauses relating to escrow termination. Sometimes, there's an additional set of conditions specifically attached to it.
There should also be a timeline to complete the termination, which is particularly important if the decision is based on a dispute between the parties. You can enlist the expertise of your real estate agent to make the best of the mediation period.
Terminating an escrow agreement can be a straightforward process if all parties have agreed to it in advance. Maybe the financial landscape has rendered the agreement less beneficial, or everyone has agreed to cancel the transaction when one party is unable to meet a singular condition. Keep in mind that this document is used for different transactions, some of them outside of the real estate arena, so many factors can encourage people to end a specific agreement.
If the termination isn't a mutual decision and you wish to opt out, you have to notify the other parties as soon as you're done reviewing all the terms in the escrow agreement. This is important to ensure no time is wasted when planning for the most delicate part of the termination process.
Asset DistributionThis could be a point of contention when the clauses are vague or the costs are divided among several parties. For reference, Law Insider has a set of sample clauses detailing standard steps to terminate an escrow agreement.
The termination means that all funds should be returned to the ones who contributed to them in the first place, regardless of the conditions set for the closing. In a real estate purchase, this includes the eastern money that buyers transfer at the beginning of the transaction and any costs related to property taxes, legal fees, etc.
The funds might be distributed as determined by a court of law if there's been a breach of contract involving the deliberate withholding of information, fraudulent activity, or something along those lines.
This is why it's so important for all parties to understand the conditions laid out before signing the escrow agreement. You shouldn't rush into it, especially if you don't fully get the meaning of a particular clause in practice and its real-life ramifications. Your real estate agent can help you on this end since they will understand all the legal jargon and the local regulations attached to each clause.
While overseeing the process as neutral third parties, title agents and escrow lawyers are also there to steer the discussion in the right direction.
Want to Terminate an Escrow Agreement?You don't need to dwell on the negatives. There are many reasons why terminating an escrow agreement could be the best approach. A setback doesn't mean the end of your plans, and the best support system can help you get back on track in no time.
Remember: You don't have to face Florida's real estate industry on your own. The specialists at Key Title & Escrow will have your back at each step of the way, from the purchase offer to all the steps leading up to closing. In a real estate purchase, there's a lot of money on the line, and we know how to protect your best interests if you run the risk of financial loss. This includes providing timely advice when you want to terminate an escrow agreement. So, don't hesitate to call (305) 235-4571 or toll-free at (800) 547-0006 to get more information. And be sure to reach out to us via the website's contact form if you have specific questions about Florida real estate transactions.
At Key Title & Escrow, we'll be happy to assist you!