Understanding “Escrow”

A Key Real Estate Term Every First-Time Buyer Should Know

Buying your first home is exciting, but it also comes with a lot of new terms that can feel overwhelming. One of the most common—and most important—terms you’ll hear is escrow.

So, what does escrow mean? In real estate, escrow refers to a neutral third party that holds money and documents until all parts of a real estate transaction are complete. Think of it as a secure holding area. For example, when you put down earnest money after your offer is accepted, that money doesn’t go directly to the seller. Instead, it’s held in escrow until closing. This ensures that both the buyer and the seller are protected—your funds are safe until the property is officially yours, and the seller knows the money is there once they’ve met their obligations.

Escrow can also apply after the sale. Many lenders set up an escrow account to collect your monthly property taxes and homeowner’s insurance along with your mortgage payment. This way, those important bills are paid on time without you needing to set aside money separately.

For first-time buyers, understanding escrow helps take some of the mystery out of the process. It’s one of the safeguards that ensures a fair and smooth transaction.

If you’re exploring real estate in New Mexico or working with a trusted team like Burton Realty & Auction, you can count on experienced professionals to walk you through each step—including escrow—so you feel confident and informed on your homebuying journey.

Contact us at (575) 760-8088 to learn more.