What is Escrow?

If you have dealt with the purchase or sale of real estate you may have heard of the word “escrow,” but what is it? Escrow is a financial and legal arrangement where the seller and the homebuyer assign a third party to hold large amounts of money or property until certain terms and conditions are met. An escrow account protects the seller, homebuyer, and lender in the transaction of real estate because it does not allow any money deposited in the account to transfer between parties until all conditions are met as written in the contract. Many title companies also maintain escrow accounts. While escrow fees can be negotiated between buyer and seller, fees are often split 50/50. Fees often cost between 1% and 2% of the property’s purchase price.

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