What Really Happens During Escrow

A Step-by-Step Guide to the Escrow Process

Buying or selling a home is one of the biggest financial decisions you'll ever make—and when your offer is accepted, the next phase begins: escrow.

Escrow is the process where a neutral third party (the escrow holder) manages the details of the real estate transaction until everything is finalized. But what exactly happens during this time?

Let’s walk through the escrow process, step-by-step, so you know exactly what to expect.

Step 1: Purchase Agreement Signed

Once the buyer and seller agree to terms, both parties sign a purchase and sale agreement, officially opening the transaction.

Step 2: Escrow Is Opened

The buyer or seller’s agent opens escrow, and the buyer places a deposit, usually called “earnest money,” which is held securely by the escrow company.

Step 3: Title Report and Documentation

• The escrow holder orders a preliminary title report from the title company to ensure there are no ownership issues or title defects.
  
  

• The Statement of Identity is forwarded to the title officer to clear the title under the general index.
  
  

• Additional documents may be prepared, including termite reports, HOA information, insurance, and lien details.
  
  

Step 4: Escrow Reviews and Prepares Documents

• Escrow verifies all contract conditions are met.
  
  

• Supplemental escrow documents are sent out and signed by the buyer and seller.
  
  

• Demands for payoff (like mortgage balances or liens) are requested and reviewed.
  
  

Step 5: Buyer’s Financing

• The lender is contacted to confirm status and conditions.
  
  

• Once the loan is approved, loan documents are sent to escrow.
  
  

• The buyer signs these documents and submits the remaining funds needed to close.
  
  

Step 6: Final Escrow Review

The escrow officer reviews all buyer and seller files to verify:

• Documents are complete, signed, and notarized
  
  

• All funds are accounted for and conditions have been met
  
  

The title company also verifies title insurance requirements are satisfied.

Step 7: Funding

Escrow requests funds from the lender, and upon receipt, the transaction moves into its final phase.

Step 8: Closing

• The deed is recorded with the county
  
  

• Escrow is officially closed
  
  

• Funds are disbursed to all relevant parties
  
  

• Final statements are issued and the IRS 1099 report is prepared (for tax reporting)
  
  

Why Understanding Escrow Matters

The escrow process can feel overwhelming, especially for first-time buyers and sellers. But understanding each step demystifies the process and helps you feel more in control during one of life’s biggest milestones.

A knowledgeable real estate agent and escrow officer will guide you through it, ensuring that deadlines are met, documents are handled correctly, and you walk away with confidence and peace of mind.

Thinking about buying or selling soon? Let’s chat—I'll walk you through the entire process from start to finish.