What Does the Term Escrow Mean in Real Estate?
In California and the West, when someone talks about being "in escrow" they are referring to going through the process of purchasing a new home. An escrow company or agent is hired to hold funds -- generally the earnest money -- and important documents. The escrow acts as a central hub for the buyer, seller, lender and broker to deposit or receive funds from. The escrow company is typically referred to as the escrow holder.
The designated escrow holder plays an important role in the purchasing process. As funds are deposited into the account or documents are drafted, the escrow holder is given specific instructions on what do to with the deposits. For example, the buyer makes an offer on the property and deposits his earnest money into escrow to show his true interest in
going through with the transaction. Before the money can be distributed out of escrow, certain conditions must be met. The escrow holder manages the account appropriately per the instructions she has.
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