How to Handle Escrow Accounts in Connecticut

Instructor: Harshvardhan Kayan

Harshvardhan has a double masters degree from the UK and Germany including a specialist degree in Real Estate

An escrow is money given to a third party until the conditions of the contract are met. The Connecticut General Statutes have guidelines on how escrow accounts should be handled by the broker and the process to be followed in case of disputes.

Escrow Accounts Held in Connecticut

A real estate transaction is a time-bound and contract-bound process. During this process, a third party such as the broker can set up an escrow account to hold the purchaser's deposit until the conditions of the contract are fulfilled. After that, the escrow account is closed and this account cannot be used for any other purpose. The third party must ensure the funds or interest on the money is not misappropriated, and if done so, it shall be considered as embezzlement. Records pertaining to the escrow must be maintained by the real estate broker for at least seven years as per the rules in Connecticut. This includes all checks issued, unused checks or any modifications made to the contract.

Handling of Escrow Accounts

The escrow account is handled by a third party who is independent of the transaction. An independent third party could be a licensed real estate broker, licensed attorney, an independent bonded escrow company, title insurance company or any other institution whose accounts are insured by the government. The escrow account is opened until the close of the transaction. A transaction may close if the buyer and seller have met their contractual obligations. In certain cases, the purchaser may be in default and the escrow funds will therefore be transferred to the seller or back to the purchaser, depending on the nature of the contract.

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