Money Matters

What is Escrow?

In real estate transactions, you’ll hear the word escrow used often. All closing transactions will have an escrow officer or attorney managing the transaction throughout the title clearing process, organizing document preparation, preparing figures for the settlement statement (or closing disclosure), and overseeing the details for closing day.  Escrow is the legal concept of a neutral third party holding either funds or property on behalf of another, typically during a transaction or legal proceeding in an “Escrow or Trust Account”. 

Escrow and Real Estate

In real estate, escrow is the holding of funds on behalf of a party to the transaction, such as the earnest money deposit or other funds received prior to closing, that are specific to the transaction and its terms.  

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How Does Escrow Work?

Title agencies and real estate closing attorneys have bank accounts, called escrow or trust accounts, that are exclusive to depositing and holding funds for real estate transactions until the terms and conditions of the transaction have been met.

A party will be required to deliver funds to the escrow officer or attorney either prior to the closing, in the case of earnest money (if any), or on the date of closing. Any funds required for closing should be submitted to the title agency in the form of certified funds or wire transfer at the instruction of the escrow officer. Your funds will be immediately deposited into the escrow account of the agency to hold in escrow until said time all terms and conditions of the transaction are fulfilled.  

The escrow account is separate from the title agency’s or attorney’s operating account(s). The escrow officer or attorney will keep a record of all client funds within an escrow account and will only use those funds for the purposes stated in the transaction documents. 

If the transaction proceeds to closing, the escrow officer or attorney will disburse the funds in accordance with the contract and executed settlement statements. If the transaction fails to reach closing and cancels, the escrow officer or attorney will require a cancellation and agreement by all parties as to whom any funds are to be returned or disbursed to.


Escrow is common in real estate transactions. The escrow funds delivered to the title agency are always held in a separate escrow account and are specifically used for your transaction and never commingled with the title agencies operating funds. Escrow funds are not released or disbursed until all terms and conditions of the transaction have been met, all necessary funds have been delivered to the company,and proper authorization of disbursement is received.  In the event of a cancellation, a mutual agreement must be executed to release any funds held in escrow. 

The information provided in Blueprint Academy does not, and is not intended to, constitute legal advice. All content is for general informational purposes only and is not intended to provide a complete description of the subject matter. Specific processes will vary based on applicable law. The title and closing process will be handled by a third-party attorney to the extent required by law. Product offerings vary by jurisdiction and are not available or solicited in any state where we are not licensed.