This article explains, in plain language, how the release of trust or escrow funds typically works in a real estate transaction in Texas when the deed has not yet been recorded. It uses common facts and practical examples so you can understand the issues and take steps to protect your money and your ownership interest.

Key legal ideas you should know (short version)

• A deed transfers ownership when it is validly delivered and accepted. Recording the deed is separate from the legal transfer; recording creates public notice and protects priority, but does not by itself create or destroy the underlying conveyance.
• Escrow instructions (the written agreement between buyer, seller, and escrow agent/title company) usually control when the escrow agent may disburse funds. If the instructions require proof of recording, the escrow agent can—and usually will—refuse to release funds until the deed shows on the county records.
• If funds are released before recording, the releasing party faces risk: the buyer may be left without recorded title or may face competing claims from later purchasers or lienholders. The escrow agent or releasing party may also face contract or tort liability if they disburse contrary to instructions.

How this plays out in a typical Texas transaction (hypothetical facts)

Hypothetical: A buyer deposits the purchase price into a title company’s escrow account. The seller signs a warranty deed and gives it to the title company. The closing instructions state: “Title company will record deed and disburse funds only after evidence of recording is provided.” The deed is mailed to the county clerk, but the clerk has not yet recorded it because of backlog or missing paperwork. The seller asks the title company to immediately wire the purchase money.

What generally happens in Texas: the title company or escrow agent will follow the escrow/closing instructions. If those instructions expressly require confirmation of recording, the escrow agent can lawfully refuse to release funds until it sees the recorded deed (or receives other proof required by the instructions). Even if the seller insists, releasing funds prematurely exposes the escrow agent to claims from the buyer (and possibly to regulatory or contractual penalties).

Why recording matters — and why it is not the same as delivery

Delivery: Under property-law principles, a properly executed deed transfers title when the grantor delivers the deed and the grantee accepts it. Recording: The public recording system puts third parties on notice that the conveyance occurred. A recorded deed helps protect the buyer against later claims by other purchasers or lienholders who might claim an interest that arose earlier but was not publicly recorded.

Practically, many escrow instructions require recording before disbursement because recording reduces risk. Recording confirms that the buyer’s ownership has been publicly established and that the county records reflect the transaction.

When funds may be released before recording (common exceptions)

• Express escrow instructions. The parties can agree that the escrow agent will disburse funds upon delivery of the deed (not waiting for recording). If the escrow agent follows written instructions signed by the parties, the agent may release funds as directed.
• Simultaneous exchange. At a coordinated closing, escrow agents often obtain the executed deed and immediately record it (or confirm recording electronically) and disburse funds in the same closing event. Practical confirmation (a recording number, for example) can trigger release.
• Title insurance & other protections. If a title company issues a commitment or title insurance that covers post-closing risks, the escrow agent might rely on that coverage and disburse earlier according to the parties’ instructions.

Risks if funds are released before the deed is recorded

• Priority problems: If the deed isn’t recorded, another buyer or creditor could record a conflicting instrument and claim priority depending on relative notice and recording timing.
• Seller default or fraud: If the seller receives funds and then fails to provide an enforceable deed or conveys the property to someone else, the buyer may have to sue for breach of contract or seek equitable remedies—possibly expensive and uncertain.
• Escrow agent liability: An escrow agent that disburses contrary to written instructions may face damages, regulatory enforcement, or claims from the disadvantaged party.

Practical steps to protect your money and title in Texas

1. Insist on clear, written escrow/closing instructions that specify under what exact condition the escrow agent will disburse funds (for example: “disburse only after delivery of recorded deed showing instrument number and clerk stamp”).
2. Ask for proof of recording before funds are released: a recording instrument number, a scanned copy of the recorded deed with the county clerk’s stamp, or an online county clerk record showing the recorded deed.
3. Consider using title insurance. A lender’s or owner’s title insurance policy protects against many post-closing title defects and is a common way buyers reduce risk.
4. Request a “hold back” or escrow hold if any required document is missing or incomplete. Holdbacks temporarily protect funds until recording or other requirements are satisfied.
5. Communicate in writing. Keep emails and signed instructions showing what parties agreed to about the timing of recording and disbursement.

What to do if funds were released prematurely

If an escrow agent or title company releases funds before the deed is recorded and you believe that was wrongful under the escrow instructions, you should:

• Gather and preserve all documents and communications (escrow instructions, closing statement, emails, copies of the deed, and any proofs of recording).
• Notify the escrow agent, title company, and the other party in writing that you dispute the release and request immediate remedial action.
• Contact a real estate attorney as soon as possible to evaluate claims (e.g., breach of contract, negligence, or conversion) and to explore remedies such as a judicial lien, constructive trust, or damages.

Where to look in Texas law

Texas law separates the legal transfer of title (delivery/acceptance of a deed) from the public-records function of recording. Recording statutes and rules about public records and priorities are codified in the Texas statutes and are administered at the county level in each county clerk’s office. For state statutes and to read the recording laws and property code, search the Texas statutes at the Texas Legislature website: https://statutes.capitol.texas.gov/. For regulatory guidance on closing and escrow practices, check the Texas Real Estate Commission (TREC) at https://www.trec.texas.gov/ and the Texas Department of Insurance (which oversees title insurance) at https://www.tdi.texas.gov/.

Helpful Hints

• Always get the recording instrument number or an image of the recorded deed before accepting a disbursement as final.
• Use a licensed title company or an escrow agent with good references and a written escrow agreement.
• Ask whether title insurance is included in the closing and what it does and does not cover.
• Build time into your closing timeline for county recording delays—don’t plan disbursements based solely on “mailing” the deed.
• If you are a seller and need funds fast, consider an escrow arrangement that allows conditional release after recording confirmation is provided to the escrow agent.