What Is Escrow in a California Real Estate Deal?

Escrow is the neutral middle of a California real estate transaction. The buyer's funds, the seller's deed, and the paperwork all flow through an escrow holder, a licensed neutral third party who may release them only when the conditions in the written escrow instructions are satisfied. When people say a home "is in escrow," they mean the period between the signed purchase agreement and the closing.

The escrow holder's duties are narrow but strict: follow the joint instructions of the parties exactly, stay neutral, and safeguard the money and documents. The escrow holder is not a lawyer for either side and owes no duty to advise anyone about the wisdom of the deal. Liability arises when an escrow deviates from instructions, closes without a required condition, or mishandles funds, including in the wire fraud scenarios that plague Southern California closings when criminals spoof payoff or deposit instructions.

Escrow disputes usually surface as interpleader actions over contested deposits, claims for closing errors, and fraud recovery cases where the loss traces to someone ignoring a red flag in the instructions.