Jeff’s Carlsbad Blog for First Time Home Buyers


FAQs – Part 8 (Escrow)

Posted in FAQs by Jeff Dowler on November 19, 2006

What is Escrow?

This is a fairly common question, especially for new home buyers and those coming from other parts of the country where the process is different (e.g., escrow companies are used in California, but typically not in Massachusetts). While itself a fairly simple concept, people use the word escrow in a number of ways; for example, you hear things such as “falling out of escrow” and “opening escrow”:

1. Simply, it refers to a neutral third party in the transaction (the escrow company or escrow holder) that holds the deposit until closing, and is also responsible for ensuring that all necessary and required paperwork is signed and received, and all the conditions are met by the buyer and seller before approval of closing and recording of the documents for the property transfer and the deed. Thus escrow is a short-term trust arrangement in which the principals of the transaction trust that the escrow holder will carry out their wishes, and the escrow holder has the duty to be trustworthy as an agent for both parties, and to follow their instructions (referred to as escrow instructions) which are laid out in the offer to purchase agreement.

2. Escrow is sometimes used to refer to the actual bank account that is opened where the funds deposited by the buyer are held until closing (i.e., an escrow account).

3. Escrow can also be used to refer to the period of time during which the conditions agreed upon by the buyer and seller are met, and all the necessary paperwork is reviewed, approved and signed, then forwarded to the escrow company.

For more on this subject, check out escrow in Wikipedia.

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  1. […] in California the transaction is coordinated by an Escrow Company, who holds the down-payment and manages the flow of paperwork until the transaction is completed […]


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