Net Benefits: The Value of Triple Net Escrow Settlements

By Randolph T. Mason, CCIM, SIOR, Partner with Commercial Realty Specialists

Escrow plays an important impartial role in the sale of a property, and a competent escrow agent is invaluable.

Escrow, an arrangement in which a disinterested third party holds legal documents and funds on behalf of a seller and buyer and distributes them according to the seller’s and buyer’s instructions, provides protection and convenience for both the seller and buyer. The buyer can instruct the settlement company to disburse the purchase price only upon the satisfaction of certain conditions, while the seller can instruct the company to retain possession of the deed to the property until their requirements have been met, including receipt of the purchase price.

Both buyer and seller rely on the escrow or settlement company to carry out their mutual consistent instructions relating to the transaction and to advise them if any of their instructions are not mutually consistent or cannot be carried out in the time frames agreed upon.

Another benefit is that both the buyer and seller can move forward separately but simultaneously in providing mandatory disclosures, property inspections, reports, loan commitments and funds, deeds and many other items, using the settlement agent as the central depositing point. The agent keeps the transaction paperwork organized and accounted for.

When escrow instructions from all parties to the transaction are clearly drafted, fully detailed and mutually consistent, the settlement agent can take many actions on the party’s behalf without the need for consultation or interruption. This saves all parties time and helps facilitate the closing of the transaction.

An escrow company can help in the following areas:

• Acting as the impartial stakeholder, or depository of documents and funds;
• Processing and coordinating the flow of documents and funds;
• Keeping all parties informed of progress on the escrow;
• Responding to the lender’s requirements;
• Securing a title insurance policy;
• Obtaining approvals of reports and documents from the parties as required;
• Prorating and adjusting insurance, taxes, rents, et cetera;
• Recording the deed and loan documents;
• Maintaining security and accountability of monies owed and owing.