Escrow is an agreement made with a third party called an escrow holder, to hold documents and funds for the buyer and seller and distribute them accordingly.
An escrow holder…
• opens the order for title insurance, if the lender has not already ordered.
• sends out a copy of the title insurance to all parties.
• receives funds from the buyer and/or lender.
• prorates insurance, taxes, rents, etc.
• disburses funds for title insurance, recordation fees, real estate brokerage, lien clearance, etc.
• prepares final statement for each party, indicating amounts to be disbursed for services and any futher amounts, necessary to close escrow.
• records deed and loan documents, delivers the deed to the buyer, loan documents to the lender and funds to the seller, closing the escrow.