Escrow & Title
In Colorado, a 'construction escrow' is used when:
AA. A property is purchased with cash only
BB. Funds are held by an escrow agent and disbursed in stages as construction milestones are met, protecting both the lender and the owner from contractor non-performance✓ Correct
CC. The title company holds the buyer's down payment only
DD. The contractor holds all construction funds
Explanation
A construction escrow (or construction draw escrow) holds construction loan funds and releases them to the contractor in draws as specified construction milestones are inspected and approved. This protects the lender (ensuring work is completed before funds are released) and the owner (preventing overpayment for incomplete work).
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