What is an Escrow?
An escrow is a deposit of funds, a deed or other instrument by one party for the
delivery to another party upon completion of a specific condition or event. It
is an independent neutral account by which the interests of all parties to the
transaction are protected.
When opening an escrow, the buyer and seller of a piece of property establish
terms and conditions for the transfer of ownership of that property. These terms
and conditions are given to a third, impartial party known as the escrow holder.
The escrow holder has the responsibility of seeing that the terms are carried
The escrow is a "storehouse" for all monies, instructions and
documents necessary for the sale of your home. This includes the buyer providing
funds for a down payment, and the seller depositing the deed and any other
Why Do I Need an Escrow?
An escrow will provide you with a guarantee that no funds or property will
change hands until ALL of the terms and conditions have been followed. The
escrow holder has the responsibility to watch over the funds and/or documents
and then pay out the funds and/or transfer the title only when all requirements
of the escrow have been completed.
How Does the Escrow Process Work?
The buyer, seller, lender and/or borrower cause escrow instructions to be
created, signed and delivered to the escrow officer. The escrow officer will
then process the escrow, in accordance with the escrow instructions. When all
conditions required in the escrow are met, the escrow is "closed."
Prior to close of escrow, the buyer deposits the funds required with the
escrow holder. The buyer instructs the escrow holder to release the money to the
The escrow holder acts for both parties and protects the interests of each
within the power of the escrow instructions. Escrow cannot be completed until
the instructions have been fully satisfied and all parties have signed escrow
documents. The escrow holder takes instructions based on the terms of the
purchase agreement and the lender's requirements.
The duties of the escrow holder include:
Managing the funds and/or documents in accordance with instructions
Paying all bills as authorized
Responding to requests from the principals
Closing the escrow only when all terms and conditions have been met
Distributing the funds accordingly
How Do I Open an Escrow?
Generally, the seller's real estate agent will open the escrow. As soon as you
complete the purchase agreement, the selling agent will place the buyer's
initial deposit, if any, into the escrow account at a title company or into the
real estate broker's account.
What Do I Need to Do Before My Appointment to Sign Escrow Papers?
All parties signing the documents must bring proper identification. Bring either
a valid driver's license, state identification card or current passport with you
to the title company. This item is needed to verify your identity by a notary
public. This is a routine, but necessary step for your protection.
What's the Next Step After I've Signed the Closing Escrow Papers?
After both parties have signed all the necessary instructions and documents, the
escrow officer will return the buyer's loan documents to the lender for final
review. After the review is completed, the lender is ready to fund the buyer's
loan and informs the escrow officer.
How Long is an Escrow?
The length of an escrow is determined by the terms of the purchase agreement and
can range from a few days to several months.
What is an "Escrow Closing"?
An escrow closing is the climax of the transaction. It signifies legal transfer
of title from the seller to the buyer. Generally, the Grant Deed of Trust is
recorded within one working day of the escrow holder's receipt of loan funds.
This completes the transaction and signifies the "close of escrow."
Once all the conditions of the escrow have been satisfied, the escrow officer
informs you or your agent of the date escrow will close and takes care of the
technical and financial details. The final closing papers are disbursed upon
close of escrow, when the escrow officer verifies with the County Records Office
that the documents have recorded and legal transfer has occurred.