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Escrow is a process that provides for a fair and equitable transfer of property from one person to another through a neutral third party, usually a title or escrow company, and in some cases, an attorney.

Custom determines whether buyer or seller will select the third party. Custom and market conditions also dictate which escrow costs the buyer or seller pays. Escrow can be paid by the buyer or the seller or split between the two.

Once a contract, commonly called a real estate purchase agreement and receipt of deposit, is signed by the buyer and seller, it is sent to an escrow company. The contract provides the instructions for the escrow officer.

The escrow officer opens escrow by assigning an account number and collecting the buyer's deposit and any additional documents related to the transaction. The initial deposit is usually applied to the purchase price or costs of the transaction.

Choosing an escrow officer is much like choosing any real estate professional. Get several referrals from trusted people, then compare services, cost and location.

The escrow officer will order a preliminary title report which summarizes the condition of the title, including easements and liens, claims and encumbrances against the property. The seller must resolve any claims against the title before the closing of the transaction.

The escrow officer will ensure that contingencies in the contract required by either party for home insurance, HOA transfer, natural hazard disclosure, home inspections, financing, repairs and other tasks are complete. Once everything is complete and title is clear and financing is arranged, each parties is given a settlement sheet with a breakdown of costs. When all parties are in agreement that the contractual obligations have been met, the escrow officer records a new deed in the buyer's name, pays the seller and disburses any other monies as directed in the contract. The escrow, the exchange of property for money, is then complete.