“What’s Escrow?”
A Must-Know for Buyers & Sellers from Non-Escrow States and outside the US.
If you’re from New York, Texas, Illinois, or overseas, like Japan, you may be surprised by how real estate transactions work in Hawaii.
That’s because Hawaii is what’s called an “Escrow State.” Unlike states where attorneys handle closings, Hawaii uses a neutral third-party company (called an escrow company) to manage the entire transaction.
It’s a system that can feel unfamiliar at first, but once you understand how it works, you’ll likely appreciate how safe and efficient it really is.
What Is Escrow?
In escrow states, a licensed escrow or title company acts as the neutral party between buyer and seller.
Their job is to:
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Hold funds securely in a trust account
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Confirm all contract contingencies are met
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Manage the transfer of ownership
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Record the deed with the state
Escrow companies do not represent either party. They don’t offer legal advice. Their only job is to protect both sides by making sure everything is done correctly, legally, and fairly.
If you’re coming from Japan or a U.S. state where attorneys handle closings, this might feel unusual, but in Hawaii, escrow is the standard. All real estate brokerage associated with Hawaii Association of Realtors are required to use escrow companies.
Why It Matters (and Why It Works)
Escrow plays a central role in every real estate sale in Hawaii.
Here’s why this system is so valuable, especially for out-of-state or international buyers:
✅ Safe handling of funds
All money—from deposits to loan proceeds—is placed in a secure escrow trust account. No one gets paid, and no title transfers until every single step is completed. Funds are released only after recording.
✅ Transparent process
Escrow follows instructions signed by both buyer and seller. Nothing moves forward without a written agreement from both parties.
✅ Ownership is verified
Escrow companies work with title companies to research property records and ensure that the seller truly owns what they’re selling. They’ll also record the new deed with the state once the sale is complete.
✅ Fraud prevention
Just recently, a transaction we were involved in was stopped thanks to the escrow company catching a fraud attempt. Someone pretending to be the owner was trying to sell a property they didn’t actually own.
Thanks to the title check, the fraud was caught before it went any further.
That moment reminded us just how valuable escrow really is.
Common Question: “Who Picks the Escrow Company?”
There’s no single rule- it depends on the negotiation.
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Often, the seller’s agent requests a title report from an escrow company.
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However, buyers can request a different escrow company as part of their offer.
On the Big Island, I frequently work with Title Guaranty Escrow and First American Title, both respected companies with a long track record in Hawaii. That said, all licensed escrow companies in Hawaii follow strict rules and offer similar protections.
Hawaii Requires Escrow—No Exceptions
If your agent is a member of the Hawaii Association of Realtors (as they should be), escrow is required by law.
If someone suggests skipping escrow or handling money directly, that’s a major red flag. In Hawaii, licensed escrow is your legal and financial protection.
Trusted Escrow Companies in Hawaii
Here are some of the most widely used and trusted escrow providers in the state:
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Title Guaranty Escrow
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First American Title
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Old Republic Title
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Fidelity National Title
Each of these works hand-in-hand with title insurance companies to deliver safe, compliant closings.
Final Thoughts: Escrow Is Different—And That’s a Good Thing
If you’re buying or selling in Hawaii and you’re from a non-escrow state, or from outside the US where escrow doesn’t exist, this process can feel new.
But it’s built for protection.
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Your money is safe.
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Your ownership is verified.
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The process is neutral, legal, and clean.
Escrow might not be something you’ve dealt with before, but here in Hawaii, it’s the reason closings run smoothly and securely.
If you’re planning to buy or sell on the Big Island and want to understand more about how Hawaii closings work, I’d be happy to walk you through the steps.
Let’s make your Hawaii transaction a confident one—start to finish.