How Escrow Works

Whether it's your first purchase or you're a seasoned Buyer, you most likely will be utilizing a title company or attorney to act as your escrow officer. You've just gotten your contract accepted by the Seller and now it's time to make your earnest money deposit...also known as an escrow deposit. Is it going to be safe?  

First, a little about "escrow". To process and complete the sale of a home, a neutral, third party (the escrow company) is engaged to assure the transaction will close correctly and on time. Escrow agents hold money for "safe-keeping" in an exchange between a buyer and seller. For example, in an online transaction, PayPal is the neutral third party that holds the buyer's money, and then hands over the money to the seller.

The escrow agent also makes sure that the terms and conditions of the agreement between the seller and buyer are performed in preparation of the sale being finished.

These are the records that escrow holders usually compile:

  • Requests for payment for various services to be paid out of escrow funds
  • Loan documents 
  • Tax statements 
  • Fire and other insurance policies 
  • Title insurance policies 
  • Terms of sale and any seller-assisted financing 

Upon finishing of all instructions of the escrow, closing can take place. At this time, all payments and dues for inspections, title insurance and real estate commissions are paid out. The property's title is given to you and title insurance begins per the steps of your individual escrow agreement.

At the close of escrow, payment of funds shall be made in an acceptable form to the escrow officer, usually in the form of a bank wire transfer or a cashier's check. 

The Escrow Holder Will: 

  • Write escrow guidelines 
  • Perform a title search 
  • Comply with the bank's standards as outlined in the escrow agreement 
  • Intake funds from the buyer 
  • Prorate interest, insurance, tax and other payments according to guidelines 
  • Record deeds and other paperwork as instructed 
  • Obtain title insurance policy 
  • Close escrow when all terms of agreement of seller and buyer are complete 
  • Disburse funds and finish instructions 

The Escrow Holder Won't: 

  • Offer advice - the escrow agent must maintain a neutral, third-party status 
  • Dispense opinions about the outcome of your taxes

Mortgage Escrow Account:

A Mortgage Escrow Account is started to pay on-going fees and expenses while there is a mortgage on your house, usually property taxes and homeowner's insurance. Escrow Accounts are contributed to monthly by the home buyer (who is now the homeowner), but there is also a lump sum that goes into the account at the time of closing.

This is a basic guide about the escrow process. Your specific scenario may be different based upon your lender and your escrow servicer. If you have additional questions, contact Joe Bornstein, 877-333-2811 or email me at