In CA, Realtors in general process Real Estate transactions through an escrow account. In a very simplified definition, an escrow company is a neutral third party that will process the transaction. Escrow companies do not negotiate on behalf of any party of the contract, nor can they change the terms or wording of the purchase contract on their own, they can only take instructions from either party and then both parties must agree to the new terms or instructions in writing.
Escrow will read the purchase contract and send out Escrow Instructions that summarize what the purchase contract states. Escrow collects the monies of the transaction from the earnest money, the buyers down payment and closing costs to the monies from the buyers lenders. When escrow receives all the necessary monies and requested documentation from all parties involved in the particular purchase contract, escrow will then send required documentation to be recorded and once these documents are recorded the property transfers to the new owner.
Going beyond the close of Escrow where it relates to transfer of the property from seller to buyer, the buyer may still have an Escrow account for the purpose of collecting property taxes and mortgage payments. Some lenders will require an established Escrow account with a reserve of property taxes which protects the lender from the buyer not paying the property taxes.
Escrow then is responsible for paying the property taxes when due on behalf of the homeowner and also paying the mortgage company. This is the most common practice, however each Real Estate transaction is guided by the lender of the buyer.
The selection of the Escrow Company is normally done by agreement between the principals. It is the right of the principals to use an Escrow Company who is competent and who is experienced in handling the type of Escrow at hand.
There are laws that prohibit the payment of referral fees, this affords the sellers and buyers the best possible Escrow service without any compromise caused by a person receiving a referral fee.