~3 minute lesson · Beginner · Buying a Home
Escrow and title: two different jobs
The Short Answer
Learn how money is held and how ownership claims are reviewed.
How It Works
Escrow coordinates an exchange
Transaction escrow is a neutral process for holding money and documents while agreed conditions are completed. The escrow officer follows written instructions to help transfer the property and distribute funds. This is different from the mortgage impound account used later to collect taxes and insurance.
Title describes ownership rights
A preliminary title report identifies recorded ownership, liens, easements, and exceptions that need review. An easement can give another party rights to use part of the land; a lien can secure a debt. Ask about anything that affects your intended use or must be resolved before the sale closes.
Policies protect different interests
A lender’s title policy protects the lender’s insured interest. An owner’s policy addresses the buyer’s insured interest, subject to its terms and exclusions. Neither is a home inspection or a promise that every possible problem is covered. Discuss policy coverage, exceptions, and the negotiated allocation of fees before closing.
California Example
After an accepted offer, escrow can hold documents and funds while title work checks ownership and recorded interests. The exact sequence follows the contract and local practice.
What to Remember
- Escrow coordinates an exchange
- Title describes ownership rights
- Policies protect different interests
Review the title report and distinguish owner’s coverage from the lender’s policy.