Escrow is "a deed, a bond, money or a piece of property held in trust by a third party to be turned over to the grantee only upon fulfillment of a condition," as defined by Webster.

It exists to provide confidentiality and impartiality during a real estate transaction. Escrow exists because buyers, sellers and lenders have a personal stake in the outcome of any real estate transaction. It is important to have a neutral party ensuring that all requirements for a successful transaction are met.

Escrow is this neutral third party, designed to assist buyers, sellers and lenders in meeting all of the mutually agreed upon terms and conditions. The escrow holder is used as a depository. Buyers and sellers provide funds, deeds, inspection reports, insurance information and any other related documentation to escrow. They then give the escrow officer written instructions that must be met prior to completion of the transaction (recordation).

Escrow begins once a buyer and seller successfully negotiate an offer. Once the seller accepts an offer, the buyer deposits earnest money into escrow.

A title report is ordered after escrow is opened. This is a search to ensure the seller actually owns the property in question. The title search exists to determine if there are any liens against the property. It also looks to see if there are any breaks in the chain of title.

Any applicable financing is now processed. After obtaining loan approval, the lender prepares the loan instructions and documents, and sends them to escrow. Inspections are completed and insurance information is gathered and processed. New insurance policies are set up for the new owner (including title insurance, homeowner's insurance, and any other applicable or desired coverage).

After inspections and insurance have been obtained, a loan agreement has been reached and a title search has been completed, the next step begins. The escrow officer will review the file to determine that all contractual conditions have been met, the lender's instructions have been followed, and all title requirements have been satisfied. Closing documentation is then prepared.

Both buyer and seller will sign all related documentation. The buyer will then submit all closing funds into escrow (although this can also be done by the seller or in combination). The lender deposits the loan funds into the escrow account. Escrow then authorizes the release of recording.

Documents are recorded at the county recorders office. Funds are disbursed in accordance with the Disclosure/Settlement Statement, and the final documentation is forwarded to all interested parties. Escrow is then deemed closed.