What Is Escrow? Earnest Money, Payoffs, and Disbursements Explained

“Escrow” gets used in two ways in real estate. One is the closing escrow handled by a title company; the other is the ongoing escrow account your lender keeps for taxes and insurance. This article focuses on the first.

Escrow means a neutral third party

When you’re under contract, money changes hands between people who don’t know each other. An escrow agent — the title company — holds the funds and releases them only when the contract’s conditions are met and everyone has signed.

Earnest money

Earnest money is the good-faith deposit a buyer makes when an offer is accepted. It’s held in escrow and usually applied to the buyer’s funds at closing. If the deal falls apart, what happens to earnest money depends on the contract terms. At Sure Title, buyers can send earnest money through our secure digital link instead of mailing checks.

Payoffs

Before closing, we request payoff statements for the seller’s mortgage and any liens. At closing, those are paid directly to the lienholders — and payoff instructions are verified to make sure money goes to the real lender.

Disbursements

After documents are signed and the lender funds, we disburse: the seller’s proceeds, commissions to each brokerage, payoffs, taxes, recording fees, and any other approved payments listed on the settlement statement.

How funds stay safe

• Escrow accounts are separate from operating funds and reconciled regularly.
• Identity verification before sensitive payment information is shared.
• Wire instructions delivered only through a secure, encrypted portal.
• Phone verification of any instructions — always.

Related: Escrow Services · Wire Fraud Prevention · FAQ

This article is general information, not legal, tax, or financial advice. Every transaction is different — consult your attorney, lender, or tax professional about your situation.