What Is Escrow?
Understanding the Role of Escrow in a Real Estate Transaction
Escrow is an important part of many real estate transactions. Understanding how it works, who may be involved, and what happens during the process can help buyers, sellers, and other parties approach closing with greater clarity.
Last updated: May 2026
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So, what exactly is escrow?
In a real estate transaction, escrow generally refers to an arrangement in which certain funds, documents, or other items are held and handled according to applicable instructions and requirements while the transaction progresses toward closing.
The specific escrow process can vary depending on the transaction, parties, lender requirements, and applicable laws or practices.
How does escrow work?
Once an escrow or closing order is opened, applicable transaction information and instructions are received and the coordination process begins.
Depending on the transaction, this may involve title work, lender information, documents, funds, settlement details, and communication among the applicable parties.
ESCROW IS OPENED
Applicable transaction information is received.
INFORMATION IS COORDINATED
Applicable title, lender, document and transaction requirements are coordinated.
CLOSING IS PREPARED
Applicable documents, settlement information and closing details are prepared.
TRANSACTION MOVES TO COMPLETION
Applicable signing, funding, settlement and post-closing activities take place.
ESCROW FAQ
Common Questions About Escrow
Who is involved in escrow?
Depending on the transaction, the process may involve buyers, sellers, real estate professionals, lenders, title and settlement professionals, and other applicable parties.
When is escrow opened?
Escrow or a closing order is generally opened after the parties have entered into an applicable real estate transaction agreement and the necessary transaction information is provided.
What information may be needed?
Requirements vary by transaction but may include property information, party information, contract documents, lender information, payoff details, identification, and other applicable closing information.
How long does escrow take?
The timeline varies depending on the transaction, financing, title matters, documentation, applicable requirements, and other circumstances.
What happens to funds in escrow?
Applicable funds may be handled according to transaction instructions, closing requirements, and applicable procedures. Specific requirements depend on the transaction.
Is escrow the same as title insurance?
No. Escrow/closing services and title insurance serve different functions within a real estate transaction. Title insurance generally addresses certain covered title risks subject to the terms, conditions, exclusions, and exceptions of the applicable policy.
What happens before closing?
Applicable title matters, documents, lender requirements, settlement information, funds, and other transaction details may need to be coordinated before the transaction can proceed to closing.
What happens at closing?
Depending on the transaction, applicable documents are executed, required funds are coordinated, and other settlement activities take place as the transaction moves toward completion.
Escrow and Title: What’s the Difference?
ESCROW / CLOSING
Focuses on coordinating applicable transaction instructions, documents, funds, settlement information, and closing activities.
TITLE
Focuses on researching and evaluating applicable title information and addressing title-related matters associated with the transaction and applicable title insurance.
Although they serve different functions, title and escrow/closing services often work together as part of the broader real estate closing process.
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