Escrow Agreements Explained

Escrow Agreements Explained: Investor-Focused Closings with Elevated Title

In the world of real estate investing, creative deal structures are often the key to getting across the finish line. Whether you’re navigating last-minute repairs, unresolved liens, or delayed occupancy, having a title partner that understands how to manage escrow agreements is critical to protecting your interests and keeping transactions moving forward.

At Elevated Title, we specialize in working with real estate investors and routinely handle the types of escrow arrangements that come with more complex deal terms. Here’s a breakdown of the four most common escrow agreements we facilitate—and what you need to know about how they work.

Earnest Money Escrow

Earnest money is the buyer’s good-faith deposit, typically submitted at the time of contract execution. Whether held by the title company, a brokerage, or the seller, earnest money is applied toward closing costs or the purchase price if the transaction closes.

However, if a contract is canceled or terminated, the earnest money will not be released to either party unless:
Both parties (or their appointed representatives) provide written authorization instructing the title company to do so.

As a neutral third party, Elevated Title cannot determine who is entitled to earnest money in a dispute. We require written, signed instructions from both sides to disburse the funds.

Repair Escrow

Repair escrows are used when work cannot be completed before closing but the parties agree to move forward. In these cases, we hold an agreed-upon portion of the seller’s proceeds in escrow to ensure the completion of specific repairs after closing.

The repair escrow agreement prepared by Elevated Title will outline:
– The scope of repairs to be completed
– A firm timeline for the work
– How the funds will be paid (e.g., to a contractor upon invoice or to the seller after buyer approval)
– What happens if the repairs are not completed on time (e.g., funds may be released to the buyer or used to hire another vendor)

Once the repairs are completed and verified, funds are only released upon written authorization from both parties or their appointed representatives.

Lien Escrow

Unlike other escrows, lien escrows usually deal with known seller liens that cannot be resolved in time for closing—such as contractor liens, utility bills, or unresolved HOA balances.

To keep the transaction on track, Elevated Title will typically hold 150% of the outstanding lien amount from the seller’s proceeds. Once an official payoff statement is received, we disburse funds to satisfy the lien and return any remaining balance to the depositor (typically the seller).

This ensures the buyer receives clear title while giving the seller time to resolve the debt without delaying the transaction.

PCOA (Post-Closing Occupancy Agreement) Escrow

Post-closing occupancy agreements (PCOAs) are common when a seller or tenant needs to remain in the property for a period of time after closing. In these situations, an escrow is often used to protect the buyer from potential damage, holdovers, or breach of the occupancy terms.

A portion of the seller’s proceeds is held by Elevated Title and will only be released when:
– The seller or occupant vacates as agreed
– The property is confirmed to be in acceptable condition
– Written authorization is provided by both parties or their appointed representatives.

Important Note: Escrow Disbursements Require Written Agreement

It’s essential to understand that title companies act as neutral third parties. We do not make decisions about who is entitled to funds.

No escrowed funds can be released until both parties—or their appointed representatives—submit signed, written instructions.

This policy protects all parties and ensures that disbursements follow the contract and agreed terms.

Pro Tips for Investors Using Escrow Agreements

– Always be specific. Vague repair scopes or timelines lead to conflict. Be detailed in your escrow instructions.
– Plan for enforcement. If a party doesn’t comply (e.g., fails to vacate or complete work), your agreement should clearly state what happens to the funds.
– Don’t wait on the lien release. If you’re the seller, get lien statements early and communicate openly to avoid 150% holdbacks.
– Use designated representatives. If you’re out of town or using a transaction coordinator, ensure they’re authorized in writing to sign escrow disbursement instructions on your behalf.
– Communicate with your title officer. The earlier you loop us in, the better we can help you structure agreements that protect your investment and align with Colorado law.

A Step Above the Rest

Whether you’re a wholesaler, flipper, or buy-and-hold investor, you need a title company that understands your business. Elevated Title has the experience, flexibility, and legal expertise to help you close complex deals cleanly and confidently.

Want to learn more about using escrow agreements to strengthen your next deal?
Visit www.elevatedtitleco.com or contact us at theateam@elevatedtitleco.com.

Elevated Title – A Step Above the Rest.