Most people think buying or selling a home is just four parties:
- Buyer
- Seller
- Buyer’s agent
- Seller’s agent
But there’s another key player behind the scenes.
The escrow company.
What is an escrow company?
An escrow company is an independent third party in a real estate transaction whose primary role is to protect the interests of all parties involved in the sale.
They’re not on the buyer’s side or the seller’s side.
They’re the neutral party that helps make sure the transaction closes the way the purchase contract says it should.
Think of escrow as the “middleman with rules” (not opinions).
They don’t negotiate terms, and they don’t advocate for either party.
What does an escrow company do?
An escrow company manages the closing process by holding funds and documents and making sure the purchase contract is carried out before anything is released.
You’ll usually work with an escrow officer, which is the person at the escrow company who coordinates the day-to-day details.
At a high level, escrow does three things:
- Hold funds and key documents during the transaction
- Verifies contract conditions are met (for example, required paperwork is signed and required items are received)
- Releases money and final documents only at closing, so the buyer doesn’t take ownership and the seller doesn’t get paid until everything is complete.
For sellers, an escrow company plays an important role in the home selling process.
They typically hold the buyer’s earnest money, coordinates payoffs for existing loans and liens, and prepares the seller’s settlement statement.
For buyers, escrow coordinates with the lender, schedules the final signing, and prepares the buyer’s final closing statement showing all costs and credits.
Escrow company vs. title company
An escrow company and a title company are not the same, but they often work together to close the transaction.
A title company handles the legal ownership side of the sale.
Early on, it issues a preliminary title report that shows who holds title and highlights items that could affect the transfer (like liens, easements, or recorded restrictions).
It also provides title insurance to the buyer and lender to help protect against future ownership disputes.
An escrow company runs the closing logistics.
It coordinates required paperwork and signatures, tracks contract deadlines and conditions, and disburses funds correctly when the transaction closes.
In some parts of the country, one company handles both escrow and title (for example, Northern California).
In other areas, two separate companies provide these services and coordinate closely.
Who opens escrow in a real estate transaction?
In most transactions, the buyer’s agent or the listing agent opens escrow.
Local practice and the purchase agreement determine which side chooses the escrow company.
For example, in many parts of California it’s common for the seller’s agent to open escrow before the home is even listed (often to get a preliminary title report started).
In many other states, escrow is opened by the buyer’s agent after the buyer and seller have a signed, accepted contract.
How much does an escrow company charge (and who pays)?
Escrow fees vary by location and transaction size.
In most home sales, you can expect the escrow company’s fee to range from a few hundred dollars to a couple thousand dollars.
But the exact amount depends on a few factors:
- Your area’s fee structure (some places use set fees, others scale with price)
- Whether escrow and title are bundled (in some regions, one company handles both)
- Add-on services (wire fees, courier fees, notary or mobile signing, HOA document handling).
If you’re selling, our home sale calculator can give you a rough estimate of your total closing costs, including escrow and title fees.
Who pays the escrow fee?
Who pays is usually driven by local practice and what’s negotiated in the purchase contract.
Common scenarios include:
- Split between buyer and seller
- Seller pays escrow, buyer pays title (or the reverse)
- Each side pays their own escrow-related fees as itemized on the settlement statement.
Your closing disclosure or settlement statement will break this out clearly.
And your agent or escrow officer can tell you what’s typical in your area early in the process.
Conclusion
Escrow companies play an important role in protecting both the buyer and seller by keeping the closing process neutral and organized.
They help ensure money and documents only change hands when the purchase contract’s conditions are met.
That’s why it’s worth working with a reputable escrow company (and a responsive escrow officer) anytime you’re buying or selling a home.
