As a practical matter, the escrow holder delegates certain settlement duties to the title company who is charged with insuring the delivery of a clear title at closing.

What is sub-escrow?

As a sub-agent of the escrow holder, the title company’s payoff department – also called the sub-escrow department — will receive the loan proceeds from the buyer/borrower’s new lender and use those funds to pay off existing property liens, such as taxes and the existing mortgage loans. When the necessary matters have been addressed, the remainder loan proceeds are distributed back into the escrow trust account for use and disbursement by the escrow holder in the final settlement of the transaction. Title sub-escrow departments charge a nominal fee for the performance of these sub-escrow duties.

Check out more important terms in our Escrow Glossary