Escrow papers are the bundle of contracts, deeds, loan documents, disclosures, and tax forms that a neutral third party collects, processes, and records to complete a real estate sale. The escrow holder keeps everything in trust and will not release funds or transfer the deed until every condition in the paperwork is met. If you are about to open or close an escrow, here is what sits inside that package and what each document actually does.
The Contract Documents That Set the Terms
Every other paper in escrow traces back to the purchase agreement. That is the contract you and the other party signed when you agreed on price, contingencies, earnest money, and closing date. The escrow officer uses it as the blueprint for a separate set of escrow instructions, which spell out exactly what must happen before money moves and the deed is recorded. The instructions function as standing orders: the officer cannot disburse funds or release documents until every condition is checked off.
The earnest money deposit lands in escrow at the same stage. Buyers typically put down around 1% to 3% of the purchase price as a good-faith deposit, held in the escrow holder’s trust account. If the deal closes, that money is credited toward your down payment and closing costs. If it collapses because of a failed contingency such as a bad inspection or denied financing, the contract usually lets the buyer recover it. Walk away without a valid contingency, and the seller may be entitled to keep it.
Documents That Transfer Ownership
Grant Deed
The grant deed is the legal instrument that moves ownership from seller to buyer. It names both parties, gives the legal description of the property, and carries the conveyance language confirming the seller’s intent to transfer. Once it is signed and notarized, the escrow officer records it with the county recorder’s office. Until that recording happens, the buyer does not officially own the property.
Bill of Sale
When furniture, appliances, or other items that are not permanently attached to the property are part of the deal, a separate bill of sale handles those. The grant deed covers real property and fixtures only. A refrigerator the seller agreed to leave, a set of patio furniture, or a riding mower each needs its own paperwork. Without a bill of sale, arguments about who owns the washer and dryer can drag past closing day.
Title Report and Title Insurance
Before the escrow officer will schedule closing, a title company searches public records for anything that could cloud the seller’s ability to transfer clean ownership. That search produces a preliminary title report, and it is one of the most important documents you will review. The report lists existing liens, easements, recorded judgments, and restrictions on the property. Unpaid property taxes, an old deed of trust never reconveyed after payoff, or a contractor’s lien all show up here and have to be resolved before closing.
Two title insurance policies usually appear in the package. A lender’s policy is almost always required when you are financing the purchase. It protects the lender’s interest in the property for the life of the loan if a title defect surfaces later. An owner’s policy protects you for as long as you own the home. Owner’s coverage is optional, but worth serious consideration. Defects that slip past the search, such as a forged deed in the chain of title or an undisclosed heir with a claim, can be extraordinarily expensive to fight without insurance.
Mortgage and Loan Documents
If you are financing, the loan documents will be the thickest stack in the package. Two pieces matter most.
Promissory Note
The promissory note is your written promise to repay the loan. It sets out the principal, interest rate, payment schedule, any late-payment penalties, and whether a prepayment penalty applies. Only the people who sign the note are personally liable for the debt. If you co-own the home but your spouse did not sign the note, the lender cannot pursue your spouse personally for the balance, though the lender can still foreclose on the property itself.
Deed of Trust or Mortgage
The security instrument, called a deed of trust in most states and a mortgage in others, pledges the property as collateral. It is recorded in the county land records and creates a lien. If you stop paying, that lien gives the lender the right to foreclose. The security instrument also sets out your obligations to carry homeowner’s insurance, pay property taxes, and keep the property in reasonable condition. It typically contains an acceleration clause that lets the lender demand the full remaining balance if you default.
Riders and Addenda
Special circumstances bring attached riders. A condominium rider for a condo, a planned unit development rider for a PUD, separate riders for two- to four-unit and investment properties, and an addendum for adjustable-rate mortgages that details how and when the rate changes. Each one modifies the standard security instrument to fit conditions that do not apply to a straightforward single-family purchase.
The Closing Disclosure
The Closing Disclosure is a five-page form your lender must provide at least three business days before you sign final papers.1Consumer Financial Protection Bureau. TILA-RESPA Integrated Disclosure FAQs The three-day window exists so you can compare the final numbers against the Loan Estimate you received when you applied. The form breaks down your loan terms, projected monthly payments, total closing costs, and the exact cash you need to bring to closing.2Consumer Financial Protection Bureau. 12 CFR 1026.38 – Content of Disclosures for Certain Mortgage Transactions
Read it line by line. If the interest rate, loan amount, or monthly payment differs from your Loan Estimate by more than the tolerances federal rules allow, the lender has to issue a corrected disclosure and restart the three-day waiting period. This is where many buyers catch errors: a miscalculated escrow impound, a recording fee charged to the wrong party, or an origination fee that crept up since the estimate. The three-day buffer is your last real chance to push back.
Required Disclosures and Tax Forms
Lead-Based Paint Disclosure
Federal law requires sellers of any home built before 1978 to disclose known lead-based paint hazards before the buyer is locked into the contract.3eCFR. 40 CFR Part 745 Subpart F – Disclosure of Known Lead-Based Paint Hazards Upon Sale or Lease of Residential Property The seller must hand over any existing inspection reports and provide an EPA-approved information pamphlet. Buyers get a 10-day window to hire an inspector for a lead risk assessment, though you can waive that period in writing. The purchase contract itself must include a lead warning statement. Homes built in 1978 or later are exempt, as are certain senior housing and zero-bedroom units.
Statement of Information
The statement of information asks for personal details like your date of birth, Social Security number, and prior addresses. The purpose is practical. The title company uses it to confirm that the liens and judgments pulled from public records actually belong to you and not to someone with a similar name. Errors or omissions on this form are one of the most common causes of last-minute delays, because the title company has to clear up the identity confusion before it will issue a policy.
FIRPTA Affidavit
The Foreign Investment in Real Property Tax Act requires the buyer to withhold 15% of the amount realized on the sale when the seller is a foreign person. To avoid that withholding, a domestic seller signs an affidavit under penalty of perjury certifying they are a U.S. person and providing their taxpayer identification number. Two exceptions apply even when the seller is foreign. If the buyer intends to use the property as a residence and the sale price is $300,000 or less, no withholding is required. If the price is above $300,000 but does not exceed $1,000,000 and the buyer intends to use it as a residence, the withholding rate drops to 10%.4Office of the Law Revision Counsel. 26 USC 1445 – Withholding of Tax on Dispositions of United States Real Property Interests
IRS Form 1099-S
Federal law requires the person responsible for closing, usually the title company or escrow officer, to report gross proceeds of the sale to the IRS on Form 1099-S.5Office of the Law Revision Counsel. 26 USC 6045 – Returns of Brokers The form goes to the seller and to the IRS. An exception applies to the sale of a principal residence at $250,000 or less ($500,000 for married couples filing jointly) if the seller provides written certification that the Section 121 gain exclusion applies. Any capital gain from the sale is taxed at 0%, 15%, or 20% depending on taxable income and filing status.6Internal Revenue Service. Topic No. 409, Capital Gains and Losses
How You Choose To Hold Title
One of the most consequential decisions buried in the escrow paperwork is how you vest title on the deed. The name and structure you put down affects inheritance rights, exposure to a co-owner’s creditors, and whether the property has to pass through probate when someone dies. Changing vesting later typically requires a new deed and can trigger a reassessment. Get it right the first time.
- Sole ownership. One person holds full title and can sell, transfer, or will the property to anyone without another owner’s consent.
- Joint tenancy. Two or more co-owners hold equal shares. When one dies, the survivors automatically inherit that share without probate. Transferring or encumbering a share without the other owners can break the joint tenancy and convert it to a tenancy in common.
- Tenancy in common. Each co-owner holds a separate share that can be unequal. There is no automatic right of survivorship. Each owner can sell, transfer, or will their share independently, even to a stranger.
- Community property. Available in a handful of states for married couples and registered domestic partners. Each spouse owns a 50% interest in property acquired during the marriage. A deceased spouse can only will their half.
- Community property with right of survivorship. Combines the community property framework with automatic transfer to the surviving spouse, avoiding probate on the deceased spouse’s share.
The escrow officer will ask you to specify how you want to hold title, but cannot give legal advice about which option to choose. If you are buying with a spouse, partner, business partner, or family member, a short conversation with a real estate attorney before you fill out vesting instructions can save years of headaches.
What You Need To Bring
Before you sit down with the papers, gather everything in one place. A single missing piece of data can bounce the entire package back for corrections and push closing out by days.
- Government-issued photo ID. Driver’s license or passport. The name on your ID must match the name on every document exactly. A middle name on one form and a middle initial on another is enough to cause a problem.
- Social Security number or taxpayer identification number. Required for the 1099-S, the FIRPTA affidavit, and the lender’s reporting obligations.
- Vesting instructions. The exact legal names and the ownership structure you chose.
- Homeowner’s insurance binder. Lenders require proof of a policy in place before they will fund the loan. The binder should list the lender as an additional insured or loss payee.
- Loan payoff information if you are selling. Account numbers and contact information for every existing mortgage or lien that must be paid at closing. The escrow officer will order payoff demands from each lender, which can take a week or more.
- Verified wiring instructions. Confirm these by calling the escrow officer directly at a number you already have on file.
Most of these documents require your signature in front of a notary public. Notarization is legally required for anything that will be recorded with the county, including the grant deed and the deed of trust. Remote online notarization is now authorized in 47 states and the District of Columbia, but check with your escrow officer and lender first, because some loan products and some county recorders still do not accept remotely notarized documents.
Verify Wiring Instructions Before You Send a Dime
Real estate wire fraud happens at exactly the moment you are most distracted by the closing process. A hacker monitors email between you, your agent, and the escrow company, then sends an email with fraudulent wiring instructions that look nearly identical to the real ones. You wire your down payment and closing funds to the criminal’s account instead of the escrow company’s, and the money is usually unrecoverable within hours.
Never wire funds based on instructions received by email alone. Confirm wiring details by calling your escrow officer at a phone number you obtained independently, from the company’s website or your original paperwork, not from the email. If wiring instructions change at the last minute, treat it as a red flag and verify before sending a cent. That five-minute phone call is the cheapest insurance in the entire transaction.