Definition
A neutral third-party account that holds funds until all parts of a transaction are complete, often used in real estate deals.
What to consider
- Use escrow to keep large sums safe during important transactions.
- Understand when funds will be released during a deal.
- Keep all related paperwork together for peace of mind.
Real world scenarios
- Paula deposits funds into escrow while buying a condo. The seller only receives the money once all contractual conditions are met.
- An escrow account covers annual property taxes and insurance, rolled into Jack’s monthly mortgage payment for simplicity.
- During a real estate dispute, funds remain locked in escrow until the buyer and seller resolve their disagreements.
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