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Escrow State and a Lawyer State

Exploring the Difference Between an Escrow State and a Lawyer State

When it comes to real estate transactions, the process can vary depending on the state in which you’re buying or selling a property. Some states operate under an escrow system, while others rely on the involvement of real estate attorneys. Understanding the difference between these two approaches is crucial for anyone navigating the real estate market. In this blog post, we’ll explore the distinction between an escrow state and a lawyer state, providing you with valuable insights to help you make informed decisions.

Escrow State: The Role of a Neutral Third Party

In an escrow state, such as California, the real estate transaction is handled by a neutral third party known as an escrow company. This impartial entity ensures that the process remains fair and transparent for both the buyer and the seller. Here’s a breakdown of how the escrow process typically works:

  1. Opening Escrow: Once the buyer and seller agree on the terms of the transaction, they open an escrow account with an escrow company. This step initiates the process.
  2. Deposit and Document Review: The buyer places a deposit into the escrow account, demonstrating their commitment to the purchase. Simultaneously, the escrow company reviews all relevant documents and conditions associated with the transaction.
  3. Title Search and Insurance: The escrow company conducts a thorough title search to ensure there are no liens or encumbrances on the property. They also facilitate the issuance of title insurance to protect the buyer’s ownership rights.
  4. Fulfilling Conditions: The escrow company ensures that all conditions outlined in the purchase agreement are met. This includes tasks such as property inspections, appraisals, and loan approvals.
  5. Closing: Once all conditions are satisfied, the escrow company coordinates the closing process. This involves transferring the funds from the buyer to the seller, ensuring a smooth and secure transaction.

Hawaii is just one example of an escrow state. Other states that operate under a similar system include Arizona, Nevada, and Oregon. The use of neutral third parties helps streamline the real estate transaction process and provides an added layer of protection for all parties involved.

Lawyer State: The Involvement of Real Estate Attorneys

In contrast to escrow states, lawyer states, like New York, involve the direct participation of real estate attorneys throughout the transaction process. These attorneys provide legal guidance and ensure that all legal requirements are met. Here’s how the process typically unfolds in a lawyer state:

  1. Contract Negotiation: The buyer’s and seller’s attorneys negotiate the terms of the purchase agreement, ensuring that the contract protects their respective clients’ interests.
  2. Title Search and Due Diligence: The buyer’s attorney conducts a comprehensive title search to uncover any potential issues or discrepancies with the property’s ownership. They also review other essential documents, such as surveys, zoning reports, and inspection reports.
  3. Document Drafting and Review: The attorneys prepare and review all necessary legal documents, including the deed, mortgage agreements, and any additional contracts or disclosures required by state law.
  4. Legal Compliance: Throughout the transaction, the attorneys ensure compliance with all applicable laws and regulations. They address any legal concerns that may arise during the process.
  5. Closing Representation: At the closing, the buyer’s and seller’s attorneys are present to represent their clients’ interests. They ensure that the necessary documents are signed, funds are transferred correctly, and that the transaction is legally binding.

New York is just one example of a lawyer state. Other states that require attorney involvement in real estate transactions include Georgia, Massachusetts, and Florida. The involvement of real estate attorneys provides expertise and legal protection for both buyers and sellers.

Choosing the Right Approach for Your Real Estate Transaction

The choice between an escrow state and a lawyer state ultimately depends on the specific legal requirements and customs of the state in which the property is located. It’s essential to consider factors such as local laws, transaction complexity, and personal preferences when deciding which approach to pursue.

While escrow states offer the convenience of neutral third-party facilitation, lawyer states provide the expertise and legal assurance of real estate attorneys. Consulting with a local real estate professional, such as a real estate agent or attorney, can provide valuable guidance tailored to your specific location and circumstances.


Understanding the difference between an escrow state and a lawyer state is crucial for anyone navigating the real estate market. Whether you find yourself in California relying on escrow companies or in New York with real estate attorneys by your side, knowing the nuances of each approach empowers you to make informed decisions and ensures a smooth transaction process. Remember, whether you’re buying or selling a property, consulting with local professionals is always recommended to navigate the intricacies of real estate law in your state.

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