What Is Escrow in Real Estate? Who Holds the Money and the Paperwork

Escrow lets a buyer and a seller who don't know each other finish a sale safely. A neutral company holds the buyer's money and both sides' paperwork, and it releases everything only when every condition in the contract has been met.

The same word is also used for the tax and insurance account your lender keeps once you own the home. When someone says a house is "in escrow," they mean the sale is under way and hasn't closed. When your mortgage statement shows an escrow balance, that's the lender's account, and it has nothing to do with buying.

I'm Jen Keene, a REALTOR® with eXp Realty Luxury in Scottsdale. I'm not the agent you call once. I'm the agent you call at every stage of your life. The rest of this is about the first meaning, the one you're in the middle of when you're under contract.

In Arizona, escrow and title companies close the sale, not attorneys. The escrow officer works for neither you nor the seller. They follow the written instructions you both signed, so they can't tell you whether a repair request is reasonable. I'm the one on your side.

The title company is usually the same company as the escrow company, doing a second job. It searches the public record for anything that could interfere with your ownership, like a lien, an old loan or an easement, and then insures against what the search misses.

Your earnest money goes to the escrow company within a day or two of the seller accepting your offer. It's credited toward your down payment and closing costs at closing.

The purchase contract and any amendments sit with escrow. The preliminary title report comes from the title company and tells you what the search found. The seller's disclosures and the HOA documents, if there's an association, arrive inside the same window as your inspections. Here's how that window works, and when your earnest money is at risk.

Your lender's paperwork arrives near the end: the loan documents, the closing disclosure and the instructions for sending your closing funds. Here's how financing works once you're under contract, and here's what closing costs run and who pays them.

• They think the escrow officer represents them. The officer is neutral. Your agent and your lender look out for you.
• They treat earnest money as a fee. If the sale closes, you apply it to what you already owed. It's at risk only if you cancel for a reason the contract doesn't cover, or after your window has closed.
• They wire money from an email. Criminals send convincing emails with changed wiring instructions timed to the day funds are due. Call the escrow officer on a number you already had before you send anything.

If you're under contract on a Scottsdale home right now, your earnest money is already with the escrow company, and your inspections are scheduled or finished. Your lender has your file in underwriting, and the preliminary title report is in your inbox or on its way. If the HOA package arrived, read the reserve study, because it tells you whether a special assessment may be coming.

If you're selling, you're in escrow too. The same neutral company holds the documents, and the preliminary title report confirms your own title is clear to sell. Here's how I run a listing from signing through closing.

Want the step-by-step version? I wrote the longer walkthrough of an Arizona escrow here. Questions about an escrow you're in? Get in touch or call me at (480) 203-6605.