Free escrow agreement template

How to fill it in

An escrow agreement is only as good as its release conditions, so spend your time there. Everything else is straightforward once you name the three parties and describe what is being held.

• Parties: enter the two sides as Party A and Party B, then the escrow agent's name and address. The escrow agent signs too, since it is a party to this contract.
• Escrowed property: describe exactly what is deposited, such as a dollar amount by wire, an executed document, or shares, and say who deposits it.
• Account: name the bank and state whether escrowed funds sit in a separate escrow or trust account and whether they earn interest.
• Release conditions: this is the clause that matters most. Write the trigger in plain, testable terms, for example closing of the sale, delivery of a named document, or a specific date.
• Fee: set the escrow agent's fee and say who pays it or how it is split.
• Governing law and signing: choose the state whose law applies, then all three parties sign.

How escrow release works

The escrow agent can let go of the property in only three situations, and building all three into the agreement prevents most fights. First, the stated condition is met, for example the transaction closes or a named document is delivered, and the agent releases automatically. Second, both parties sign joint written instructions telling the agent what to do; this covers changes of plan and early releases both sides agree to. Third, a court issues a final order. Notice what is missing: the escrow agent cannot release the property just because one party demands it, even a party who turns out to be right. That is the safeguard escrow is built on, and it is why the release conditions have to be written clearly enough that the agent can apply them without judgment.

What the escrow agent does and does not do

The escrow agent's duties are ministerial, which means it follows the agreement mechanically and does not exercise discretion. It holds the property, checks whether the written conditions are met, and releases accordingly. It is not a judge. It does not interpret the underlying deal, decide who breached, or take sides. To protect the agent, the agreement lets it rely in good faith on instructions and documents that appear genuine without investigating the facts behind them. When the two parties give conflicting instructions or fall into a dispute, the agent's safe move is to hold everything until it gets joint written instructions or a court order. If the standoff drags on, the agent can file an interpleader action, deposit the disputed property with the court, and step out of the fight; the court then decides who gets it. Interpleader adds cost and delay, which the parties usually bear, so it is a last resort rather than a first move.

Types of escrow and when to use each

The same basic agreement adapts to several common situations, and each has its own release trigger and its own rules to watch.

• Real estate: a buyer's earnest money, commonly around 1 to 3 percent of the price and higher in hot markets, is held by a title or escrow company until closing. Settlement services for a mortgaged home also fall under the federal Real Estate Settlement Procedures Act, or RESPA, which the Consumer Financial Protection Bureau enforces.
• Mergers and acquisitions: buyers often hold back a slice of the purchase price, frequently in the range of 5 to 15 percent and typically for 12 to 18 months, to cover breaches of the seller's promises. Both figures scale with deal size and are negotiated up front.
• Software source code: a vendor deposits its source code, released to the customer only on a defined event such as the vendor ceasing business or failing to support the product. Tie the trigger to a performance failure, not to bankruptcy alone, because a release that fires only on a bankruptcy filing can be unenforceable as an ipso facto clause under Section 365(e) of the Bankruptcy Code.
• Online sales: a service such as Escrow.com holds the buyer's payment until the buyer confirms delivery, then pays the seller. These internet escrow services are licensed and regulated at the state level.

Escrow agreement vs. the purchase agreement

These two documents work together but do different jobs, and keeping them separate avoids confusion. The purchase agreement is the deal itself: it binds the buyer and seller to the price and the obligations between them. The escrow agreement is a separate contract that brings in the neutral agent and tells it, and only it, how and when to release what it holds. You will sometimes see the release terms written as escrow instructions inside or alongside the purchase contract, but the full escrow agreement goes further: it also sets the agent's fee, its limited liability, the indemnity that protects it, and its right to rely on instructions. Think of the purchase agreement as the deal and the escrow agreement as the rulebook for the stakeholder who sits in the middle.

Fees, licensing, and account safety

Escrow is a paid, regulated service, and knowing the ground rules helps you fill in the fee clause and choose an agent. Real estate escrow fees commonly run around 1 to 2 percent of the sale price, sometimes charged as a flat fee, and buyer and seller often split them, though who pays is negotiable and varies by region. Many states license and bond escrow holders. California is the clearest example: the California Escrow Law, in Division 6 of the state Financial Code, is administered by the Department of Financial Protection and Innovation, which licenses escrow agents, requires surety and fidelity bonds, and examines them. Other states regulate escrow through their title-insurance or real-estate rules instead, so the details differ by state. On safety, funds an escrow agent holds for you generally qualify for FDIC pass-through insurance, which protects each principal up to the standard 250,000 dollars per bank rather than lumping everyone together, as long as the bank's records identify the true owners. None of this replaces reading your own agent's disclosures, but it tells you what a legitimate escrow holder looks like.

Signing it

An escrow agreement is an ordinary commercial contract. It is valid once all three parties sign, and it does not normally need to be notarized or witnessed. You can print it and sign by hand or fill it in and sign online, which gives every party a clean dated copy. Online signing is valid for an escrow agreement under the federal ESIGN Act and the Uniform Electronic Transactions Act. One thing to keep separate: some instruments the escrow handles, such as a real estate deed, do need notarization to be recorded, but that requirement lives with the deed, not with the escrow agreement. Once signed, give a copy to each party and the escrow agent so everyone works from the same release conditions.