Escrow Cancellation Instructions

Canceling escrow is usually a matter of paperwork and a cancellation fee.

Canceling escrow is usually a matter of paperwork and a cancellation fee.

There are two main types of escrow accounts: real estate escrow and mortgage escrow. The former is used when purchasing real estate. A trusted third party --the escrow company -- holds payments from the buyer and mortgage company until the seller fulfills his end of the deal, including repairs and title transfer. Mortgage escrow accounts hold a portion of your monthly mortgage payment to cover real estate taxes and insurance required by your lender. You generally may cancel both types of accounts, subject to escrow agreement terms.

Canceling Closing Escrow

Contact the other party to cancel the real estate transactions. Generally, once you are in the escrow process, you may back out only if the other party fails to meet contingencies. Check the terms of your sales contract. The other party may wish to negotiate rather than cancel the sale.

Inform the escrow company the sale has been canceled. The company may require additional paperwork from both buyer and seller to verify before releasing any documents or money. If the parties cannot resolve issues, the escrow company may bring the matter before a judge.

Pay any required fees for cancellation. Details will be in the escrow agreement, as will how long it will take to receive any proceeds or paperwork once the escrow account is closed.

Canceling Mortgage Escrow

Check your mortgage closing documents for the escrow agreement. Your lender may not allow cancellation or may charge a fee to cancel the account.

Contact the lender to obtain any necessary escrow cancellation forms.

Complete the required documents. You will need to prove to the lender that all necessary taxes and insurance will be paid on time.

Inform your local property tax authority and mortgage insurance company that you will be paying directly to be certain they send you the necessary billing documents.

Wait for a check for any balance in the account at cancellation. It may take up to 30 days for the lender to release the funds. Check the escrow cancellation paperwork for specifics regarding your lender's policies.

Pay property taxes and insurance on time. You may be subject to fees and penalties for late payments, which is one reason escrow accounts are so convenient.


  • Keep in mind that if you have reached the escrow stage in a home sale and then back out, you likely will have incurred expenses that will need to be paid, such as inspections and appraisals. These expenses will be taken out of the money you put in escrow before any refund is issued.

About the Author

Naomi Smith has been writing full-time since 2009, following a career in finance. Her fiction has been published by Loose Id and Dreamspinner Press, among others. She holds a Master of Science in financial economics from the London School of Economics and a Bachelor of Arts in political economy from the University of California, Berkeley.

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