What Is An Escrow and Why Do We Need One?



The word “escrow” comes from a French word meaning both “scroll” and having custody of such a scroll. Escrows are used for a wide variety of business purposes.

In California real estate, we use specially licensed and highly regulated escrow companies to act as a “disinterested” third party to transactions between buyers and sellers. Buyers and sellers give the escrow company and the escrow officer “custody” of purchase agreements and related funds so that escrow can confirm that certain terms of the agreement are carried out and that the funds are disbursed per the agreement. This responsibility involves the understanding of, and processing of, a great deal of documentation, deeds, and very often loan documents, and requires awareness of other title-related issues.

In the case of mobilehomes, the job of escrow becomes even more intensive. Transfer of title and a variety of other title issues are under state jurisdiction, not county, as in other types of transactions. The procedures for clearing and transferring title are quite different from the same procedures in real property transactions and involve far more paperwork. Escrow officers also need to coordinate with park managers to confirm that all park-required conditions for transfer of ownership have been met. For these reasons, only very few escrow companies handle mobilehome transactions.

Clearly, the handling of all these responsibilities requires the specialized training, experience, and financial detachment that escrow companies provide.

Despite all of this, not all aspects of purchase transactions fall under the purview of escrow companies, especially many legally-required disclosures and contract issues related to the physical property. Buyers and sellers must be informed and diligent on their own about these issues, with help from their agents.

In California, escrow companies are regulated by the state Department of Corporations.

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