Escrow Glossary: Real Estate Escrow Terms Explained
Reviewed by the Sky Escrow team, a California DFPI-licensed escrow company serving Los Angeles County.
Last updated: August 25, 2026
Escrow paperwork is full of terms that rarely come up outside of a real estate closing, and a single unfamiliar word — “impound,” “vesting,” “sub-escrow” — can make an otherwise routine disclosure feel confusing. This escrow glossary defines the terms buyers, sellers, agents, and lenders in Los Angeles County most often encounter, from the moment escrow opens through the day it closes. Terms are alphabetized and cross-linked to Sky Escrow’s more detailed guides where one exists, so this page can serve as a quick reference or a starting point for deeper reading.
0–9
1031 Exchange
A 1031 exchange (named for Internal Revenue Code Section 1031) lets an investor defer capital gains tax on the sale of business or investment property by reinvesting the proceeds into a “like-kind” replacement property within strict IRS deadlines. Escrow plays a coordinating role, but the exchange itself is structured by a qualified intermediary, not the escrow holder.1031 Exchange Escrow
A
Appraisal Contingency
A clause in the purchase contract letting the buyer cancel or renegotiate if a lender-ordered appraisal values the property below the agreed purchase price. It’s one of the standard contingencies escrow tracks toward removal or expiration.Escrow Contingencies Explained
B
Bridge Loan
A short-term loan that lets a homeowner use equity in their current property to fund the purchase of a new one before the first property sells. Bridge loan closings often run on a tighter timeline than a conventional purchase escrow.Bridge Loan Escrow
C
Closing (Close of Escrow)
The point at which all conditions of escrow have been satisfied, signed documents are recorded with the county recorder, and funds are disbursed — ownership officially transfers on this date. “Closing” and “close of escrow” are used interchangeably in California.How to Close Escrow
Closing Disclosure (CD)
A standardized five-page federal form that itemizes a buyer’s final loan terms, projected monthly payments, and closing costs. Under TRID rules, the lender must deliver it at least three business days before a mortgage loan closes.What Is TRID?
Contingency
A condition in the purchase agreement that must be satisfied, waived, or removed before the transaction becomes binding — common examples include inspection, appraisal, and loan contingencies. Escrow tracks contingency deadlines but does not decide whether a contingency has been met.Escrow Contingencies Explained
D
Deed
The legal document that transfers ownership of real property from one party to another. The deed is signed, notarized, and recorded with the county recorder to make the transfer part of the public record.
DFPI
The California Department of Financial Protection and Innovation, which licenses and regulates independent escrow companies under the California Escrow Law. Sky Escrow is licensed by the DFPI.California DFPI escrow licensing
Documentary Transfer Tax
A tax imposed on the transfer of real property, calculated on the sale price and typically collected through escrow at closing. The base county rate is set by California statute at $1.10 per $1,000 of value (0.11%) under Revenue and Taxation Code §11911, and many California cities — including Los Angeles, whose base city rate is $4.50 per $1,000 (0.45%) — add their own city transfer tax on top of it.California Transfer Tax Rates
DSCR Loan
A debt-service coverage ratio loan — investment-property financing that qualifies based on the property’s rental income rather than the borrower’s personal income.Investment Property Escrow
E
Earnest Money
A good-faith deposit a buyer submits shortly after an offer is accepted, held in escrow and later credited toward the down payment or closing costs at closing. It signals the buyer’s serious intent to complete the purchase.What Is Earnest Money?
Encumbrance
Any claim, lien, easement, or restriction recorded against a property that can affect its title or use — a mortgage and an unpaid tax lien are both encumbrances. The preliminary title report lists encumbrances of record so they can be addressed before closing.
Escrow
A neutral third-party arrangement in which a licensed escrow holder holds funds, documents, and instructions on behalf of a buyer and seller until all agreed-upon conditions of a transaction are met. Escrow protects both sides by ensuring nothing changes hands until every condition is satisfied.What Is Escrow?
Escrow Holder / Escrow Officer
The licensed neutral party who administers an escrow — reviewing instructions, holding funds and documents, coordinating with lenders and title, and disbursing funds at closing. An escrow officer does not represent either the buyer or the seller and cannot give legal or real estate advice.What Is an Escrow Officer?
Escrow Instructions
The written, signed instructions that authorize the escrow holder to carry out the transaction — who gets paid, what documents are required, and under what conditions escrow may close. Escrow acts strictly according to these instructions and cannot deviate from them without written amendment.What Are Escrow Instructions?
F
FIRPTA
The Foreign Investment in Real Property Tax Act, a federal law requiring a buyer to withhold 15% of the gross sales price under IRC §1445 when purchasing U.S. real property from a foreign seller, and remit it to the IRS — reduced to 10% in narrower cases involving a personal-residence purchase priced between $300,000 and $1,000,000, and waived entirely below $300,000 if the buyer will use the property as a residence. Escrow typically handles the withholding and remittance as part of closing.FIRPTA Withholding
FSBO (For Sale By Owner)
A property sale in which the seller markets and negotiates the transaction without a listing agent. Escrow’s role stays largely the same, though the escrow holder often takes on more process coordination normally handled by an agent.FSBO Escrow
G
Good Funds Law
California law that restricts the types of funds an escrow holder may disburse before they are confirmed collected — generally wire transfers and cashier’s checks over a certain amount, rather than personal checks. It exists to prevent escrow from releasing funds against a deposit that later bounces. Codified at California Insurance Code § 12413.1.California Good Funds Law
Grant Deed
The most common deed used in California residential transactions, in which the seller warrants they have not already transferred the property to someone else and that it carries no undisclosed encumbrances they created.
H
Hard Money Loan
A short-term loan secured by real property and funded by a private lender rather than a bank, typically used for fix-and-flip purchases or when a borrower needs to close quickly. Hard money escrows often move faster and carry different documentation requirements than a conventional purchase.Private Money and Hard Money Escrow
HECM
A Home Equity Conversion Mortgage, the FHA-insured reverse mortgage program that lets homeowners age 62 and older convert home equity into loan proceeds without monthly mortgage payments. HECM closings involve additional counseling and disclosure requirements not present in a forward mortgage.Reverse Mortgage Escrow
HOA
A homeowners association that governs a condominium, planned unit development, or other common-interest community. Escrow orders and reviews HOA documents (CC&Rs, financials, dues status) and settles any transfer fees or prorated dues at closing.
I
IAEA
The Independent Administration of Estates Act, a California probate statute letting an executor sell estate property with reduced court supervision compared to a fully court-confirmed sale, though notice to heirs is still required.Probate Escrow
Impound Account
An account, typically set up by the lender at closing, into which a portion of the borrower’s monthly mortgage payment is deposited to cover property tax and insurance bills as they come due. It is separate from the transactional escrow account that holds funds during the sale itself.What Is an Escrow Account?
Inspection Contingency
A contingency giving the buyer a defined period to inspect the property and request repairs, a price adjustment, or credits — or to cancel the contract — based on what the inspection finds.Escrow Contingencies Explained
L
Loan Contingency
A contingency allowing the buyer to cancel the contract and recover their earnest money if they are unable to secure mortgage financing within an agreed timeframe. It is generally the last major contingency removed before a purchase escrow can close.Escrow Contingencies Explained
M
Marketable Title
Title to a property that is reasonably free of liens, defects, and disputes, such that a reasonably prudent buyer would accept it without objection. Title insurance and the preliminary title report exist specifically to identify anything that could make title unmarketable before closing.Preliminary Title Report
N
Notice of Default
A recorded notice that a borrower has fallen behind on mortgage payments, marking the formal start of the foreclosure process in California. Properties that proceed to foreclosure and are repossessed by the lender are typically resold as REO.REO Escrow
O
Overbidding
A process unique to probate sales in which, after an initial offer is accepted, other qualified buyers can submit higher bids at a court confirmation hearing, with the property selling to whichever bid the court confirms.Probate Escrow
P
PCOR
The Preliminary Change of Ownership Report, filed with the county alongside a deed to help the assessor determine whether and how the property’s assessed value should be reappraised.
Preliminary Title Report
A report issued by a title company early in escrow that shows the current condition of title — ownership, liens, easements, and other recorded items — as a preview of what a title insurance policy would cover. It is a disclosure of existing conditions, not a guarantee of title.Preliminary Title Report
Probate Sale
The sale of real property belonging to a deceased person’s estate, administered as part of the probate process. Depending on the executor’s authority, it may require court confirmation and be subject to overbidding.Probate Escrow
Proration
Dividing recurring costs — property taxes, HOA dues, interest — between buyer and seller based on the exact number of days each owns the property during the billing period. Escrow calculates and applies prorations on the closing statement.
Q
Qualified Intermediary (QI)
An independent party required by IRS rules to hold sale proceeds during a 1031 exchange so the seller never takes actual or constructive receipt of the funds, which would disqualify the tax deferral. The qualified intermediary is a separate role from the escrow holder, though the two coordinate closely.1031 Exchange Escrow
R
Recording
Filing a document — most commonly a deed or deed of trust — with the county recorder’s office, making it part of the public record. Closing is generally considered complete once recording is confirmed.
Reconveyance
The document a lender records to release its deed of trust once a loan secured by the property is paid in full, clearing that lien from title.
REO
Real estate owned — property that has gone through foreclosure and reverted to the lender, which then lists it for sale. REO sales are typically sold as-is and follow bank-specific addenda and timelines that differ from a standard resale.REO Escrow
RESPA
The Real Estate Settlement Procedures Act, a federal law that regulates the mortgage settlement process, prohibits certain kickbacks and referral fees between settlement service providers, and requires disclosure of closing costs to borrowers.What Is RESPA?
S
Seasoning Period
A minimum length of time a borrower must have owned a property, or held title a certain way, before some loan programs — cash-out refinance or non-owner-occupied loans, for example — will approve financing.
Short Sale
A sale in which the property sells for less than the outstanding mortgage balance, requiring the lender to approve the sale and accept less than what is owed. Short sale escrows depend on lender approval timelines that can extend the transaction well beyond a standard closing period.Short Sale Escrow
Sub-Escrow
A secondary escrow, typically handled by a title company on behalf of the main escrow holder, that coordinates the precise, simultaneous exchange of funds and recording of the deed at closing.
T
TIC (Tenants in Common)
Co-ownership in which two or more parties each hold an undivided, often unequal, fractional interest in a single property. TIC escrows typically require additional co-owner agreements covering shared use, expenses, and exit rights.TIC Escrow
Title Insurance
A policy protecting a buyer or lender against loss from title defects that existed before the policy issued but weren’t discovered — forged prior deeds or undisclosed liens, for example. It’s a one-time premium paid at closing, not an ongoing cost.Title Insurance
TRID
The TILA-RESPA Integrated Disclosure rule, a federal regulation standardizing the Loan Estimate and Closing Disclosure forms and setting required delivery timelines, including the three-business-day rule before closing on most mortgage loans.What Is TRID?
Trust Sale
The sale of real property held in a living trust, where the trustee — not a probate court — has authority to sell on behalf of the beneficiaries. Trust sales generally move faster than probate sales, since court confirmation typically isn’t required.Trust Sale Escrow
V
Vesting
The legal manner in which title is held — sole ownership, joint tenancy, tenants in common, or through a trust, for example. Vesting determines ownership rights and how the property passes upon death.
W
Walk-Through
A buyer’s final inspection of the property, typically within a day or two of closing, to confirm its condition matches expectations and that any agreed repairs were completed before funds are disbursed.Final Walk-Through Before Closing
Wire Fraud
A scam in which criminals impersonate an escrow holder, title company, or agent — often via a spoofed email — to trick a buyer into wiring closing funds to a fraudulent account. Verifying wiring instructions by phone, using a known number, is the primary defense.Real Estate Wire Fraud Prevention
Escrow Terms That Work Differently in California and Los Angeles County
A handful of terms above carry meanings specific to California. Escrow companies here are licensed and regulated by the DFPI under the California Escrow Law — a different regime than some other states use. Documentary transfer tax is a two-layer cost in much of Los Angeles County: a countywide base rate of $1.10 per $1,000 of value (0.11%) plus, in many cities, an added city-level transfer tax — Los Angeles city’s base rate is $4.50 per $1,000 (0.45%), before any Measure ULA surcharge on qualifying high-value sales — so the effective rate depends on the property’s exact city. California’s Good Funds Law restricts what forms of payment escrow may disburse against before funds are confirmed collected, and IAEA and overbidding are specific to how California probate courts supervise the sale of estate property.California Transfer Tax Rates
Frequently Asked Questions
What’s the difference between escrow and title insurance?
Escrow holds funds and documents until a transaction’s conditions are met; title insurance protects against undiscovered defects in the property’s ownership history. They’re often handled by different companies serving different purposes in the same closing.
Is an escrow officer the same as a loan officer?
No. A loan officer works for the lender and helps the borrower secure financing; the escrow officer is a neutral third party who administers the closing itself and doesn’t represent the buyer, seller, or lender.
What’s the difference between an impound account and an escrow account?
“Escrow account” during a transaction refers to the account holding funds until closing. After closing, a lender’s “impound account” holds ongoing monthly deposits for property tax and insurance — the terms overlap in casual use but describe different stages.
Who prepares escrow instructions?
Escrow instructions are typically drafted by the escrow holder based on the terms of the purchase agreement, then reviewed and signed by the buyer and seller before escrow proceeds.
Do all of these terms apply to every escrow?
No. Many entries here — probate sale, trust sale, TIC, 1031 exchange, reverse mortgage terms — only apply to that specific transaction type. A standard residential resale typically involves a smaller core set of these terms.
Sky Escrow, Inc.
15760 Ventura Blvd, Suite 1050, Encino, CA 91436
Phone: (818) 712-0000 / (888) 891-0002
Email: info@skyescrow.com
Licensed by the California Department of Financial Protection and Innovation (DFPI), serving Los Angeles County, Malibu, Laguna Beach, and San Diego. License No. 96DBO-214073. License status: Active.
This article is for general informational purposes and is not legal, financial, or tax advice.
If a term in your closing paperwork isn’t listed here, or you’d like it explained in the context of your specific transaction, reach out to Sky Escrow’s team directly — a quick phone call is often faster than searching for a definition.