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name: escrow-instructions language: en description: Drafts binding escrow instructions for residential real estate closings. Extracts key terms from purchase agreements, identifies gaps or conflicts, and incorporates jurisdiction-specific requirements. Use when preparing escrow agent directives, closing instructions, escrow arrangements, or residential transaction closing documents.

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:

1. Executed purchase agreement — price, deposits, contingencies, closing timeline, fee allocations, dispute resolution
2. Party identification — full legal names, entity types, authorized signatories, notice addresses
3. Property information — legal description, APN, street address (from title report)
4. Financing details — loan amounts, lender identity, commitment letter status
5. 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