Reviewed by the Sky Escrow team, a California DFPI-licensed escrow company serving Los Angeles County.
Last updated: August 25, 2026
An escrow company is a neutral third party that holds funds, documents, and instructions during a real estate or business transaction until every condition both the buyer and seller agreed to has been satisfied. In California, escrow companies fall into three legal categories — independent escrow companies licensed by the DFPI, title companies performing escrow as part of a title order, and real estate brokers handling escrow under a limited licensing exemption — and the differences matter for who is actually holding your money.
What Does an Escrow Company Do?
An escrow company acts as a neutral stakeholder between a buyer and a seller (or a borrower and a lender) so that neither side controls the money or the paperwork alone. It follows the escrow instructions signed by all parties, not the wishes of any single party.
- Holds the buyer’s earnest money deposit and, later, closing funds in a trust account
- Collects and distributes documents — the purchase agreement, loan documents, disclosures, and the deed
- Coordinates with the lender, title company, and real estate agents so contingencies are cleared in order
- Prorates property taxes, HOA dues, and other shared costs as of the closing date
- Records the deed with the county recorder and disburses funds only once every instruction has been met
An escrow company does not represent the buyer or the seller, does not give legal or investment advice, and cannot release funds or record a deed until the conditions written into the escrow instructions are actually satisfied.
Who Is Legally Allowed to Act as an Escrow Company in California?
This is the part most homebuyers never get a clear answer to, and it’s the core distinction to understand before you sign anything. California law recognizes three different ways escrow work can legally be performed, and they are regulated very differently.
1. Independent Escrow Companies (DFPI-Licensed)
An independent escrow company’s only business is escrow. It is licensed and examined by the California Department of Financial Protection and Innovation (DFPI) under the California Escrow Law, which sets requirements around trust accounting, recordkeeping, and financial solvency specifically because escrow companies hold other people’s money. Sky Escrow, Inc. operates as this type of independent, DFPI-licensed escrow company. California DFPI escrow company licensing overview
2. Title Companies Providing Escrow Services
Many title insurance companies also offer escrow services as a bundled part of issuing a title policy. This is legal, common, and regulated separately — through insurance law and the California Department of Insurance rather than the DFPI’s escrow licensing framework. The escrow function is the same in substance, but the entity holding your funds is licensed under a different regulatory structure than an independent escrow company. Escrow Company vs. Title Company
3. Real Estate Brokers Acting Under the Escrow Exemption
California law also allows a licensed real estate broker to handle escrow for a transaction in which they are acting as the broker, without holding a separate DFPI escrow license — a narrow “broker escrow exemption.” This is legal, but it means the broker is not subject to the same trust-account examinations and financial requirements that apply to a licensed independent escrow company, and the same person may be representing a side of the deal while also holding the funds.
None of these three arrangements is inherently improper — but they are not interchangeable, and knowing which one you’re dealing with is the single most useful thing to check before opening escrow.
Escrow Company vs. Title Company vs. Broker Escrow, at a Glance
| Type | Primary regulator | Core business | Independent of agent/broker? |
|---|---|---|---|
| Independent escrow company (e.g., Sky Escrow) | California DFPI | Escrow only | Yes |
| Title company escrow division | California Department of Insurance | Title insurance, with escrow as an add-on service | Yes |
| Broker performing escrow under exemption | California DRE (as a broker, not as an escrow licensee) | Real estate brokerage, escrow handled in-house | No — same party as the deal |
How an Escrow Company Fits Into a California Closing
In Los Angeles County transactions, escrow typically opens within a day or two of an accepted offer, once the buyer’s deposit is delivered. From there, the escrow company tracks the contingency periods set in the purchase agreement — inspection, appraisal, and loan approval — and requests payoff demands, HOA documents, and the preliminary title report so everything is in hand before the scheduled closing date.
Because California is a “table funding” and recording-based closing state rather than an attorney-closing state, the escrow company (not an attorney) is typically the party that assembles final figures, obtains loan documents from the lender, and coordinates with the county recorder’s office to record the deed. This is also why DFPI licensing matters here specifically: the escrow company is holding real trust funds through a process with no attorney overseeing the account. California Escrow Law
What Services Does an Escrow Company Typically Provide?
The specific escrow services available can vary by company and by the type of transaction. Sky Escrow, for example, handles the following escrow types for clients across Los Angeles, Malibu, Laguna Beach, and San Diego:
- Residential and new-construction escrow
- Commercial escrow
- Refinance and 1031 exchange escrow
- Short sale and FSBO (for-sale-by-owner) escrow
- Reverse mortgage escrow
- Divorce and property settlement escrow
- Probate and trust sale escrow
- Tenants-in-common (TIC) escrow
Not every escrow company offers every service above — it’s worth confirming a company’s actual scope before opening escrow on a more specialized transaction, such as probate or a 1031 exchange. What Is an Escrow Officer?
Frequently Asked Questions
Is an escrow company the same as a title company?
No. An escrow company holds funds and documents and administers the closing process; a title company researches the property’s ownership history and issues title insurance. Some title companies also provide escrow services in-house, which is why the two are often confused. Escrow Company vs. Title Company
Does an escrow company work for the buyer or the seller?
Neither. An escrow company is a neutral third party bound by the written escrow instructions signed by both the buyer and seller, and it cannot favor one side’s interests over the other’s.
Do I have to use a DFPI-licensed independent escrow company?
Not always — California law also permits title companies and, under a limited exemption, real estate brokers to perform escrow services. However, buyers and sellers generally have the right to choose their own escrow provider, and it’s worth understanding which type of entity you’re using before signing.
How is an escrow company regulated in California?
Independent escrow companies are licensed and examined by the California Department of Financial Protection and Innovation under the California Escrow Law. Title company escrow divisions and broker escrow exemptions fall under different regulatory frameworks, as described above.
What happens if I use an unlicensed escrow provider?
Using an entity that is not properly licensed or exempt to handle escrow puts your funds at meaningfully higher risk, since it falls outside the trust-accounting and examination requirements built into California’s licensing framework. How to Choose an Escrow Company
Contact and Disclaimer
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). License No. 96DBO-214073. License status: Active.
This article is for general informational purposes and is not legal, financial, or tax advice.
If you’re opening escrow on a purchase, refinance, or specialized transaction anywhere in the Greater Los Angeles area, the fastest way to confirm what you’re working with is to ask directly who holds your funds and how they’re licensed. Sky Escrow can walk you through that answer for your specific transaction.