Escrow is defined as “a disinterested third party to the transaction”, meaning they’re on nobody’s side but the transaction itself. They ensure that whatever agreements have been made between the buyer and the seller are completed before any money changes hands, or before ownership of the property transfers.

To initiate the process, they will prepare escrow instructions for both parties to sign. Escrow instructions are a reiteration of the agreement made in the purchase contract. From there, they will receive and safeguard the buyer’s deposit, order certain disclosures, along with requesting the payoffs for any existing loans the sellers have outstanding against the property. They will order the preliminary title (or ownership) report which will show any items that may affect clear title to the property. Towards the end of the transaction, they will order the buyer’s homeowners insurance policy, and ultimately they’ll assist in having the loan documents signed and notarized, along with preparing the Grant Deed and Deed of Trust for recording.

Typically,the buyers and seller split the escrow fee, unless the contract states otherwise. The escrow fee is part of the normal closings costs involved in the transaction, along with a host of other fees and charges. Whether you’re the buyer or the seller, escrow will typically prepare an estimate of what your total closing costs will be. Those costs will be different for each party, as the buyer will have new loan fees, while the seller will have fess charged by their existing lender to determine what their payoff amounts are. It’s also somewhat normal that the seller pays all real estate commissions, although everything having to do with a real estate transaction is completely negotiable. Also note that if the anticipated timeframes vary, many of the closing costs will need adjusting.