Which party typically manages escrow in a real estate transaction?

In a real estate transaction, a neutral third party typically manages escrow. This party, often referred to as an escrow agent or escrow officer, is responsible for holding and safeguarding funds, documents, and other necessary items related to the transaction until all conditions of the sale have been met. The impartial nature of a neutral third party is essential in maintaining trust among the buyer, seller, and other involved parties, ensuring that the transaction proceeds smoothly and fairly.

The reason for involving a neutral third party in escrow is to avoid conflicts of interest that may arise if one of the parties directly manages the funds or documents. For instance, if the buyer's lender, the seller's attorney, or the listing agent managed escrow, their vested interests in the transaction could skew their handling of the responsible tasks. Hence, utilizing a neutral party ensures adherence to the terms agreed upon and proper distribution of funds and documents, reducing the likelihood of disputes.

This structure is fundamental to the integrity of real estate transactions, reassuring all parties that their interests are protected while providing a framework for the proper execution of the sale.