How Does an Escrow Work?


Escrow—What is it?
Very simply defined, an escrow is a deposit of funds, a deed or other instrument by one party for the delivery 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…

“(a) “Escrow” means any transaction in which one person, for
the purpose of effecting the sale, transfer, encumbering, or leasing
of real or personal property to another person, delivers any written
instrument, money, evidence of title to real or personal property, or
other thing of value to a third person to be held by that third
person until the happening of a specified event or the performance of
a prescribed condition, when it is then to be delivered by that
third person to a grantee, grantor, promisee, promisor, obligee,
obligor, bailee, bailor, or any agent or employee of any of the

Last modified: January 15, 2011

How Does An Escrow Work
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 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 instructions; paying all bills as authorized; responding to authorized requests from the principals; closing the escrow only when all terms and conditions have been met; and distributing the funds in accordance with instructions and provide an accounting for same – the Closing or Settlement Statement.