In real estate transactions, a payoff escrow is an escrow arrangement established specifically to pay off an existing loan secured by property. It is commonly created as part of a larger escrow and is often referred to as a sub escrow.
The payoff escrow ensures that loan funds are properly disbursed to the lender and that the lien is released upon payment in full. By handling the payoff through escrow, the parties help ensure accuracy, proper documentation, and clear title following the transaction.
