What Does Escrow Mean?

There are two types of escrow accounts. The first escrow account is the bank account that the escrow company uses to hold the funds for taxes and homeowner’s insurance. The other escrow account holds onto the buyer’s good faith deposit to ensure that the money goes to the right party. The home buying escrow account holds onto the earnest money, also known as the buyer’s good faith deposit, which is usually 3% in California. If the purchase of the home moves forward, this amount is then applied to the down payment. If the purchase of the home falls through because of the buyer, the buyer will forfeit the right to their deposit. The other type of escrow account is for insurance and taxes. After the sale of the home closes, the mortgage servicer will keep a portion of your mortgage payment until the tax and insurance payments are due every month. Since the amount of taxes and insurance can be a bit of a moving target, your lender might overestimate what they need. In this case, you will receive what is known as an escrow refund.

What Is an Escrow Officer?

An escrow officer is a person who works for a real estate broker, escrow company, or title company who acts as a third party to facilitate the transaction. This third party cannot have any ties to either party and must remain neutral. In real estate, escrow officers are well versed in communicating with agents and lenders to help your sale go smoothly.