Escrow

What is an Escrow?

Escrow is a legal concept where a third party holds funds or assets on behalf of two other parties involved in a transaction. It serves as a financial instrument to ensure that all parties fulfill their obligations before the transaction is completed. Escrow accounts may include fees managed by agents who hold the funds or assets until they receive appropriate instructions or until predetermined contractual obligations are met. Assets held in escrow can include money, securities, funds, and other valuable items, making it a secure method for transactions.

Escrow involves a third party holding assets or funds until both parties in the transaction fulfill their contractual requirements.

It is commonly associated with real estate transactions, ensuring that funds are securely held until the property purchase process is completed. However, escrow can apply to various situations where funds or assets need to pass securely from one party to another.

In real estate, escrow is used not only during the purchase of a home but also throughout the life of a mortgage, ensuring ongoing security and compliance.

Online escrow services have gained popularity, especially for high-value transactions like art or jewelry, offering a secure way to complete transactions without direct exchange of funds until all conditions are met.

Escrow is employed in diverse contexts such as Internet transactions, banking, intellectual property, mergers and acquisitions, and law. For instance, a company selling goods internationally may use escrow to ensure payment upon delivery, safeguarding both buyer and seller interests. The buyer places funds in escrow with instructions for release to the seller upon satisfactory receipt of goods, ensuring mutual trust and security.