Escrow can feel like a black box when you are buying or selling a home in Mountain City. You want to know where your money goes, who holds it, and when it gets released. In this guide, you will learn what escrow means in Tennessee, how earnest money and closing funds are handled in Johnson County, and how to protect yourself from common issues. Let’s dive in.
What escrow means in Tennessee
In Tennessee real estate, escrow is a neutral holding arrangement for money and documents while a purchase is in progress. Most often that means earnest money and closing funds are held until the contract conditions are met and the sale closes. After closing, “escrow” can also refer to your mortgage lender’s account that collects money for property taxes and homeowners insurance. These are two different things.
The pre-closing escrow protects both sides by making sure funds are only released under the contract’s rules. The post-closing mortgage escrow helps your lender pay recurring bills on time.
Who handles escrow in Johnson County
Several players work together to manage escrow in a Tennessee home sale:
- You and the other party set the escrow instructions in the purchase agreement.
- Your broker may receive the initial earnest money. Funds are then held by a title company, closing attorney, or a broker trust account, according to the contract and Tennessee Real Estate Commission rules.
- A title company or settlement agent is commonly the escrow holder. They complete the title search, issue the title commitment, coordinate closing, handle disbursements, and manage recording.
- In some transactions, a closing attorney handles title and escrow duties.
- If you have a loan, the lender sets closing conditions and provides disclosures.
- After closing, the deed and any mortgage are recorded with the Johnson County Register of Deeds to make the transfer part of the public record.
Step-by-step: escrow timeline in Mountain City
Every contract is different, but here is the typical flow you can expect locally.
Contract and earnest money
You and the seller sign a purchase agreement that states the earnest money amount and where it will be held. You deliver the earnest money as the contract instructs, often to a title company or attorney’s trust account. The money shows your intent to perform and is usually credited to you at closing.
Open escrow and title work
The escrow holder opens a file and follows the contract’s instructions. A title search is performed and a title commitment is issued that lists items to be addressed before closing. You review and work with the escrow holder to clear any issues.
Contingencies and financing
Inspection, appraisal, and financing contingencies are handled during this period. Earnest money stays in escrow while you decide whether to proceed or terminate under the contract’s terms. If you cancel within a valid contingency, release of funds follows the agreement or a mutual release.
Closing prep and disclosures
The escrow holder prepares the settlement figures, including prorations and payoffs. If you are using a mortgage, your lender must provide the Closing Disclosure at least 3 business days before closing. You review numbers, ask questions, and plan for final funds delivery by wire or cashier’s check.
Closing day and disbursement
You sign documents and deliver any required funds to the escrow holder. The lender wires loan proceeds to the escrow holder. Funds are disbursed according to instructions, existing liens are paid off, commissions are issued, and the deed and mortgage are sent for recording with the county.
After closing
Once the deed records, legal ownership transfers. The title company issues the final title insurance policies. You and the seller receive your final statements for your records.
Earnest money vs. mortgage escrow
It helps to keep these two terms straight:
- Earnest money escrow is a temporary deposit held before closing to secure performance under the purchase contract.
- Mortgage escrow (impound) is a post-closing account your lender uses to collect and pay property taxes and homeowners insurance.
One is short term and tied to the sale. The other is ongoing and tied to your loan.
Protect your funds from wire fraud
Real estate wire fraud is a growing risk. Use these safeguards:
- Verify wiring instructions by calling a trusted phone number for the title company you already have on file. Do not rely on email alone.
- Be cautious with last-minute changes. Treat any change as suspicious until confirmed directly.
- Use secure communication methods and avoid sending sensitive data over unsecured channels.
- Keep records of every deposit, including confirmations from your bank and the escrow holder.
Common issues and how to respond
- Late deposit or mishandled earnest money: Review your contract and contact the escrow holder and your broker to confirm deposit timing and receipts. Trust-account issues can be addressed through proper regulatory channels.
- Disputes over earnest money: Many contracts allow for a mutual release, negotiation, or an interpleader action where a court decides. Start by reviewing your contingency terms and talk with the escrow holder about next steps.
- Title defects late in the process: Closing may be delayed while issues are cleared. The contract will guide whether the seller must cure or whether you can terminate.
- Suspected wire fraud: Contact your bank and the escrow holder immediately, and follow their recovery guidance.
Quick checklist for buyers and sellers
- Confirm who holds earnest money and the deposit timeline in your contract.
- Keep copies of deposit receipts and wire confirmations.
- Track inspection, appraisal, and financing deadlines to protect your earnest money.
- If financing, review your Closing Disclosure at least 3 business days before closing.
- Verify wire instructions by phone using a known number. Never act on unverified email changes.
- Ask the title company about recording timing and request confirmation after recording.
How we help in Mountain City
You deserve a smooth, secure closing. With local experience across Johnson County and northeast Tennessee, you get clear guidance, steady communication, and support that keeps your contract on track. Whether you are buying your first home or selling a lake-area property, you will understand each step from earnest money to recording.
Ready to make your move with confidence? Connect with Donald White for local guidance and next steps.
FAQs
Who typically holds earnest money in a Tennessee home sale?
- A title company or closing attorney commonly holds earnest money in a trust or escrow account, as stated in the signed purchase agreement.
When do you deposit earnest money in a Tennessee purchase?
- The purchase agreement sets the delivery timing, and the escrow holder or broker must handle funds promptly according to the contract and applicable rules.
What happens to earnest money if a buyer cancels under a contingency?
- If termination follows a valid contract contingency, the escrow holder releases funds according to the agreement or a mutual written release.
Can an escrow agent release funds without both parties’ consent?
- Generally no. Escrow agents follow written instructions and release funds under contract terms, mutual agreement, or a court order.
Who records the deed in Johnson County, Tennessee?
- The title company or closing attorney typically arranges recording with the Johnson County Register of Deeds after disbursement.
When do you receive title insurance policies in Tennessee?
- Owner’s and lender’s title policies are issued after the deed is recorded and outstanding title requirements are cleared.
