An escrow is a tool used in real estate transactions to ensure that the purchase and sale of property occur as intended. At its core, it is merely the “holding” of significant property documents (like the deed) and the down payment for a piece of property. This ensures that the actual purchase of the property is not completed until all the conditions of the sale are actually met, such as the buyer officially obtaining a loan for the transaction.
As the California statutes put it, monies and evidence of title to property are “held by a third person until the happening of a specified event or the performance of the prescribed condition.” (Fin. Code § 17003.)
Escrow has numerous upsides, though it is admittedly an added expense on what it already an expensive transaction. Considering the importance of buying real estate, however, it is a safe option that ensures both buyer and seller leave the transaction satisfied.