If you’ve ever bought a home, chances are you’ve heard of a property being “in escrow.” But what does this actually mean? Escrow is the term for a neutral third party holding funds and documents to be disbursed during a real estate transaction. This is typically either an escrow officer or a title company, and even if it’s a company, the entity will be referred to as the escrow officer. The reason for this is to safeguard funds to avoid misallocation or fraud, which is why it’s important that the escrow officer is trusted by all parties involved.

The escrow process is initiated when the buyer and seller open an escrow account and deposit the funds after agreeing on the terms of the transaction. This is also when the buyer deposits their earnest money and the escrow officer collects all necessary documents, such as the purchase agreement, title documents, and loan documents, among others. Once escrow is initiated, the buyer will then have a period to investigate the property and conduct inspections. If the buyer finds any issues during this period, that’s when they can request repairs or renegotiate the agreement. Once the buyer is satisfied, the next step is to remove contingencies, after which the transaction enters the closing process. During the closing process, the escrow officer prepares closing documents and coordinates signatures. Only after the documents are signed by all parties can the funds be disbursed and title transferred to the buyer.

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