Escrow

Escrow in California Real Estate ## What Is Escrow? Escrow is a neutral depository arrangement in which a disinterested third party (the escrow holder) holds funds, documents, and instructions from both buyer and seller, and carries out their mutual instructions upon satisfaction of agreed-upon conditions. Escrow is the mechanism that allows a real estate sale to close safely — neither party releases their consideration until all conditions are met. In California, the escrow holder is an agent of both parties simultaneously — a limited dual agent for the exclusive purpose of carrying out the escrow instructions. The escrow holder cannot favor either party; their duty is to follow the written instructions they have received. --- ## Who Can Be an Escrow Holder in California? California law regulates who may conduct escrows: - Licensed escrow companies — regulated by the CA Department of Financial Protection & Innovation (DFPI) under the Escrow Law - Title insurance companies — may conduct escrow as a service; common in Northern California - Banks, savings institutions, and credit unions — authorized as depositories - Real estate brokers — may conduct escrow ONLY in transactions where the broker is the agent in the sale and represents one of the parties; cannot operate a general escrow company - Licensed attorneys — may conduct escrow as a service incidental to legal representation Regional customs: - Northern California (Bay Area): Title companies typically handle both title insurance and escrow together - Southern California (LA, OC, San Diego): Independent escrow companies are more common; the escrow and title company are often separate --- ## The Escrow Process Step 1: Opening Escrow After the buyer and seller execute the purchase agreement…