What Is Escrow and How Does It Work in Florida?
Escrow means a neutral third party holds money or documents until both sides meet the terms of the deal. In a Florida home purchase, your deposit is usually due within three days of signing and is held by a title company, real estate attorney, or broker until closing — when it is applied to your purchase price.
Two Different Things Called “Escrow”
The word gets used for two separate arrangements, and confusing them causes a lot of anxiety at the closing table.
Purchase escrow is the earnest money you put down when your contract is signed. It sits with a neutral escrow agent until the deal closes or falls apart.
Mortgage escrow is the account your lender sets up after closing, where part of every monthly payment is set aside to pay your property taxes and homeowners insurance when those bills come due.
The first one lasts weeks. The second one lasts as long as your loan.
Purchase Escrow: Your Deposit Before Closing
Under the standard Florida Realtors/Florida Bar “AS IS” contract, the initial deposit is due within three days after the Effective Date — the date both parties have signed — unless the contract says otherwise. Deposits commonly run 1% to 3% of the purchase price, though on competitive properties buyers often offer more to strengthen the offer. Many contracts also call for a second deposit after the inspection period ends.
The money does not go to the seller. It goes to an escrow agent, who must hold it in a separate escrow account within the State of Florida and disburse it only according to the contract. Real estate brokers holding deposits are governed by Chapter 475, Florida Statutes, and cannot commingle escrow funds with their own money. Title agents acting as escrow agents are subject to trust accounting requirements under Chapter 626. Attorneys hold client funds in trust accounts under Florida Bar rules.
At closing, your deposit is credited toward your purchase price and down payment. You are not paying it twice.
Who Holds the Money — and Why It Matters
In Florida you can name a title company, a real estate attorney, or a brokerage as escrow agent. The contract is where that choice gets made, and it is worth making deliberately rather than leaving it to whoever fills in the blank.
The practical difference shows up if there is a dispute. If a broker holds the deposit and the buyer and seller make conflicting demands, the broker must notify the Florida Real Estate Commission within 15 business days and start one of four settlement procedures within 30 business days — including requesting an Escrow Disbursement Order from FREC, which is only available for deposits of $50,000 or less. Those FREC procedures do not apply to deposits held by title companies or attorneys, who instead follow the contract’s dispute language and, if necessary, interplead the funds with a court.
When the Deal Falls Apart
Escrow money is not automatically forfeited when a contract dies. Who gets it depends on which contingency was in play and whether the deadline was met. A buyer who cancels within the inspection period under an AS IS contract, or who cannot obtain financing within the financing period after making a good-faith application, is generally entitled to a refund. A buyer who simply walks away after the contingencies expire is usually the one at risk of losing the deposit.
Release almost always requires a signed release-of-deposit form from both parties. One side’s opinion is not enough — which is exactly why deposits get stuck when a deal turns hostile.
Mortgage Escrow: The Account After Closing
If you finance with less than 20% down, your lender will almost certainly require an escrow account. At closing you prepay several months of taxes and insurance, then your servicer collects one-twelfth of the annual estimate each month and pays the bills for you.
Federal RESPA rules cap the cushion a servicer may hold at one-sixth of your annual escrow payments — about two months. Your servicer must run an escrow analysis each year and refund surpluses over $50. Florida homeowners see more escrow volatility than most of the country because property insurance premiums here have moved sharply in recent years, so a monthly payment that jumps after an annual analysis is common and usually reflects an insurance or tax increase rather than an error.
Escrow in Miami-Dade County
Miami-Dade closings are overwhelmingly handled by title companies and real estate attorneys rather than brokers, so most local deposits sit in a title or attorney trust account. That has a real advantage: an attorney serving as your escrow agent is also reading your contract, tracking your inspection and financing deadlines, and clearing title at the same time — so the person holding your money is the person who knows whether you are still protected.
International and out-of-state buyers, common throughout Brickell, Aventura, Doral, and Coral Gables, should also plan for wire timing and source-of-funds documentation, since escrow agents verify incoming funds before a deposit is credited. Arturo R. Alfonso P.A. has handled Miami-Dade real estate closings in English and Spanish for over 35 years and regularly serves as escrow and closing agent. If you have been searching for a real estate attorney near me in Miami to hold your deposit and close your purchase, we are ready to help.
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