Escrow vs Closing: What’s the Difference?

Many FSBO sellers confuse escrow with closing. Escrow is the process that safeguards funds and documents during the transaction, while closing is the final event where ownership transfers and money is disbursed.

✅ What Is Escrow?

Escrow begins after both parties sign a purchase agreement. A neutral third party (title company or attorney, depending on your state) holds the earnest money and key documents until contract conditions are satisfied.

  • Protects both buyer and seller during the transaction
  • Holds funds and paperwork securely
  • Releases funds only after contingencies are cleared

📑 What Is Closing?

Closing is the final step of the sale. On closing day, documents are signed, funds are disbursed, and the deed is recorded—officially transferring ownership to the buyer.

  • Final signatures and settlement documents
  • Payment of fees and prorations (see Who Pays Closing Costs?)
  • Transfer of title and keys

⚖️ Escrow vs Closing: Side-by-Side

  • Escrow: the process that manages funds, deadlines, and documents after the contract is signed.
  • Closing: the event that finalizes the sale and records ownership.
  • Think of escrow as the journey—and closing as the destination.

💡 Tips for FSBO Sellers

  • Confirm early who will handle escrow—title company or attorney.
  • Set clear timelines for inspections, appraisals, and loan approval.
  • Ask for a preliminary settlement statement before closing to avoid surprises.

❓ Escrow vs Closing FAQs

Is escrow the same as closing?

No—escrow is the protective process leading up to the end of the sale, while closing is the final appointment that transfers ownership and disburses funds.

Which happens first: escrow or closing?

Escrow opens first (after the purchase agreement is signed) and ends at closing, when documents are signed and recorded.

Do all states use escrow companies?

Not always. Some states use real estate attorneys to perform the same neutral third-party functions. Ask locally whether a title/escrow company or attorney handles settlements.