Escrow

Definition

Escrow refers to a neutral facilitator who follows the instructions of parties to a transaction, holding and disbursing funds or documents until specified conditions are met.

Purpose

The purpose of Escrow is to ensure that both parties in a transaction fulfill their obligations before the exchange of money, property, or documents. This provides security and trust in the transaction process.

Examples of Use

• Real Estate Transactions: Holding the buyer's funds until all conditions of the sale are met.
• Online Sales: Using escrow services to secure payment until the buyer receives and approves the goods.
• Business Transactions: Managing the transfer of assets or shares during mergers and acquisitions.

Related Terms

• Trust Account: An account where funds are held in trust by a third party until specified conditions are met.
• Title Insurance: Protection for property buyers and lenders against losses due to defects in the property title.
• Settlement Agent: A person or entity responsible for managing the closing of a real estate transaction.

Notes

• The terms and conditions of the escrow arrangement should be clearly outlined in an escrow agreement.
• Escrow services provide an additional layer of security in high-value transactions.