Escrow Company
Definition and meaning of Escrow Company in real estate.
An escrow company is an independent, neutral business that manages the closing process of a real estate transaction by holding funds, paperwork, and deeds in escrow.
In more detail
The escrow company acts as an impartial stakeholder that does not represent either the buyer or the seller. Its primary role is to ensure that the terms of the purchase contract and the lender's requirements are met before any money or property changes hands. Licensed professionals within the company prepare closing statements, coordinate with title companies, and handle the distribution of funds to all parties, including agents, lenders, and tax authorities. Using a licensed escrow company provides security and structure to the transaction.
Key facts
| Category | Legal, Titles & Closing |
|---|---|
| Neutrality | Must remain completely independent of the buyer, seller, and real estate agents |
| Core services | Holding deposits, preparing closing documents, and distributing transaction funds |
| Regulated by | State agencies, which license and bond these businesses |
A buyer and seller hire a licensed escrow company to oversee their home sale, trusting the firm to hold the earnest money and manage the complicated paperwork required to close the deal.
Frequently asked questions
Is an escrow company the same as a title company?
While they work closely together and are sometimes owned by the same parent firm, the escrow company handles the money and process, while the title company verifies ownership and issues insurance.
Do all states use escrow companies for closings?
No, in some states, attorneys are required to handle closings and perform the duties that escrow companies handle elsewhere.