Deed Types

• Deeds are the written documents used to convey title from the former owner to the new owner. There are a number of deed types, with the quitclaim deed providing the least amount of protection to the buyer, and the general warranty deed providing the most amount of protection to the buyer. A seller using a quitclaim deed would probably not go through an escrow process, as the quitclaim is simply a transfer of the grantor's interest in the property, and not a guarantee the grantor has title or that the property is unencumbered. A general warranty deed guarantees the seller has title, and specifies any liens against the property, typically verified through an escrow process with a title search. Ideally, funds placed in escrow should pay off all liens.
  
  

Short Sales

• In a short sale, the seller intentionally accepts an offer for less than the amount needed to pay off the loan balance. This typically occurs when property values drop, leaving the property owner unable to sell the property for enough to pay off the loan balance. These types of short sales only occur when then seller's lender approves the deal. Instead of putting additional funds into escrow to cover the short, the lender accepts the lesser amount and releases the property lien. After the short sale, the lender might seek the unpaid amount from the seller or forgive the amount, depending on the agreement with the borrower and state laws.
  
  

Seller Contributing Funds

• Sometimes a seller will enter into a purchase agreement, unaware that the sale price is not sufficient to pay off the property's debt. When this happens, the seller must place additional funds into escrow, to enable the escrow officer to pay off the liens and transfer the property, unencumbered, to the new owner.
  
  

Releasing Liens

• A standard short sale is not the only situation in which a creditor might agree to release a lien against the property, in order for an escrow to close. If funds placed into escrow by the buyer don't cover all the property liens and the seller is not in the position to pay off all the liens, it is sometimes possible to negotiate with the creditors, to release the liens.