How Escrow Can Protect and Aid You in Real Estate Transactions

The term Escrow is very widely used during home buying transactions and you would have heard about it many times while making any home buying transaction. It might sound like a confusing term since it is used to refer to a large number of events that take place during the buying of a house, especially before and after it.

Below are some of the ways in which one may define Escrow and also some of the ways in which it comes into play during the buying and selling of a house.


By definition Escrow refers to documents or some other thing of value which in most cases could be money that is held in the possession of a neutral or a third party that is to be used at a later date in order to satisfy certain obligations.

The main parts of an Escrow are:

Earnest Money Deposits- When you first go to buy a house, you are required to deposit the Earnest Money into the account of the neutral third party. When you have finished the house buying process, the money is given back to you. In case the transaction does not finally happen, this money is dispensed off in some other manner.

Agent for the Escrow- During the transaction process of buying a house, often an Escrow Agent is hired. An Escrow agent could be an attorney, a company or any other person who is hired to maintain all documents and funds that are linked to the transaction till the transaction completes.

Escrow accounts for Lenders- The Lender Escrow account is set up by the lender on your behalf to accumulate and later on pay your property taxes and home insurance as and when they become due. Typically your home insurance and tax bills are sent directly to the lender who handles them directly.