Congratulations. You’ve made the sale, and your buyer has paid the required earnest money. The buyer asks, "Where will those funds be held until the transaction is completed?"

"The escrow company," you answer, "will hold the deposit in trust, along with other relevant documents until closing. That will ensure that both you and the seller are protected during the sale process."

But what, exactly, does the escrow company do, and how do they protect both parties? If you’re not entirely sure of the answer, here is a short refresher:

• The escrow trust account opened at the start of the transaction provides a secure holding area for all funds, contracts, instructions, and other documents pertaining to the transfer of the property.
• The escrow agent is a licensed third party whose role is to ensure that everything proceeds smoothly, including the transfer of money and documents, and to hold all funds securely until they are ready for disbursement.
• Some Documentation, including contingencies, as well as all personal and financial information – will be held in the safety net of the escrow company until all conditions of the sale are met.

Once all funds have been received, and title has changed hands from the seller to the buyer, the escrow is considered closed.

The escrow company (as opposed to the title company, in some states) may or may not be involved with the legal aspects of the property’s ownership. In any case, for the protection of both buyer and seller, the escrow company plays a crucial role in every transaction, providing secure custodianship of all funds and documents until it’s time to hand over the keys.

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This material is meant for general illustration and/or informational purposes only. Although the information has been gathered from sources believed to be reliable, no representation is made as to its accuracy. This material is not intended to be construed as legal, tax or investment advice. You are encouraged to consult your legal, tax or investment professional.

About Bobbi Pronin

Barbara Pronin is an award-winning writer based in Orange County, Calif. A former news editor with more than 30 years of experience in journalism and corporate communications, she has specialized in real estate topics for over a decade. 

Bobbi is not an employee of Anywhere Integrated Services or affiliated with its title companies.