Escrow is a neutral arrangement in which a disinterested third party holds funds, documents, and instructions until the conditions of a real estate transaction are fulfilled.
Key Characteristics
Involves three parties: buyer, seller, and escrow holder
Escrow holder is a neutral agent
Acts only on written escrow instructions
Ensures proper transfer of funds and documents
Purpose of Escrow
Protects all parties to the transaction
Ensures conditions are met before closing
Facilitates orderly transfer of title
Escrow Holder Duties
Follow escrow instructions exactly
Safeguard funds and documents
Prorate taxes, rents, and insurance
Record necessary documents at closing
Disburse funds when conditions are met
Escrow in California
Escrow may be handled by a title company, escrow company, or licensed attorney
Escrow is not a fiduciary, but owes a duty of care and neutrality
Opening and Closing Escrow
Open escrow: parties deposit documents and funds
Close escrow: all conditions satisfied and documents recorded