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Most real estate transactions in the state of California utilize the services of an escrow company, yet escrow remains one of the least understood elements of the real estate process.

Escrow Fact Sheet


An escrow is a deposit of funds, a deed or other instrument by one party, to be delivered to another party upon completion of a particular condition or event. The California Escrow Law – Section 17003 of the Financial Code – provides the legal definition.


Whether you are the buyer, seller, lender, or borrower, you need assurance that no funds or property will change hands until ALL the instructions in the transaction have been followed. The escrow holder is obligated to safeguard the funds and/or documents while in the possession of the escrow holder, and to disburse funds and/or convey title only when all parties of the escrow agreement have complied with all provisions.


The principals to the escrow – buyer, seller, borrower – instruct escrow of the terms of the transaction (purchase, sale, refinance). Once escrow is instructed to the terms of the transaction, the escrow officer drafts escrow instructions. If a broker is involved, he will normally provide the escrow officer with the information necessary for the preparation of your escrow instructions and documents.

The escrow officer will process the escrow, in accordance with the escrow instructions, and when all conditions required in the escrow are met or achieved, the escrow will be “closed.” Each escrow, although following a similar pattern, will be different in some respects, as it deals with your property and the unique transaction at hand.

The duties of an escrow holder include; following the instructions given by the principals and parties to the transaction in a timely manner; handling the funds and/or documents in accordance with the instruction; paying all bills as authorized; responding to authorized requests from the principals; closing the escrow only when all terms have met in accordance with instructions and provide an accounting for the same – the Closing or Settlement Statement.