Escrow

AAA

DEFINITION of 'Escrow'

A financial instrument held by a third party on behalf of the other two parties in a transaction. The funds are held by the escrow service until it receives the appropriate written or oral instructions or until obligations have been fulfilled. Securities, funds and other assets can be held in escrow.

VIDEO

Loading the player...

BREAKING DOWN 'Escrow'

An escrow account can be used in the sale of a house, for example. If there are conditions to the sale, such as the passing of an inspection, the buyer and seller may agree to use escrow. In this case, the buyer of the property will deposit the payment amount for the house in an escrow account held by a third party. This assures the seller - in the process of allowing the house to be inspected - that the buyer is capable of making payment. Once all of the conditions to the sale are satisfied, the escrow transfers the payment to the seller, and title is transferred to the buyer.

RELATED TERMS
  1. In Escrow

    An item such as money or a piece of property that has been transferred ...
  2. Commingling (Commingled)

    1. In securities, it is the mixing of customer-owned securities ...
  3. Refunded Bond

    Bonds that have their principle cash amount already held aside ...
  4. Trustee

    A person or firm that holds or administers property or assets ...
  5. Payer

    An entity that makes a payment to another. While the term payer ...
  6. Escrow Agreement

    A legal documents that outlines the terms and conditions between ...
Related Articles
  1. Home & Auto

    What does "In Escrow" Mean?

    Escrow is a financial agreement involving two parties, usually a buyer and a seller. The buyer deposits money, securities or other funds into the escrow account, where they are held until both ...
  2. Insurance

    10 Hurdles To Closing On A New Home

    It's the biggest purchase of your life - find out what can go wrong before you even close the deal.
  3. Home & Auto

    10 Tips For Getting A Fair Price On A Home

    Don't let buying a home bust your budget. Make sure the house you choose is worth the price you pay.
  4. Home & Auto

    Should You Buy A House At Auction?

    The traditional real estate market isn't the only place to conduct your home search. Auctions also bring many buying opportunities.
  5. Credit & Loans

    Understanding The Mortgage Payment Structure

    We explain the calculation and payment process as well as the amortization schedule of home loans.
  6. Investing Basics

    10 Facts You Didn’t Know About Amazon

    Learn some interesting facts about Amazon.com Incorporated, the history behind Amazon's name and the hidden services and technologies that Amazon offers.
  7. Personal Finance

    The World's Top 10 Law Firms

    Here is a list of world's top ten law firms in terms of revenue.
  8. Entrepreneurship

    Alternatives To Business Bankruptcy

    Bankruptcy isn't the only alternative for a struggling business. It can try negotiating with creditors or liquidating assets outside the U.S courts.
  9. Retirement

    Power Of Attorney Form

    Be sure that any
  10. Retirement

    Power Of Attorney: Do You Need One?

    Having a power of attorney ensures that you select who will act for you when you are unable to handle your affairs. Without one, the courts decide.
RELATED FAQS
  1. Does the bank set up an escrow account for the buyer and seller in a home sale?

    An escrow service, rather than a bank, typically sets up an escrow account for the buyer and seller in the sale of a home. ... Read Full Answer >>
  2. Do landlords set up escrow accounts for their tenants' security deposits?

    Landlords must set up escrow accounts to hold tenants' security deposits if the accounts are required by the laws of the ... Read Full Answer >>
  3. What is the difference between legal liability and public liability?

    When you see the term "public liability" attached to a business, its products or its services, it refers to a specific type ... Read Full Answer >>
  4. What kinds of financial instruments are designated as “Securities” by Cabinet Order?

    In Japan, securities are regulated by the Diet and the Financial Services Agency, or FSA. Rulings about securities come down ... Read Full Answer >>
  5. What's the difference between cash-on-delivery differ and delivery against payment?

    Cash on delivery and delivery versus payment describe different procedures and timing of payments. Cash on delivery describes ... Read Full Answer >>
  6. What are the different ways I can file my income tax return?

    In contractual law, a letter of intent is a document that represents an agreement between parties before the final agreement ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Bubble Theory

    A school of thought that believes that the prices of assets can temporarily rise far above their true values and that these ...
  2. Stock Market Crash

    A rapid and often unanticipated drop in stock prices. A stock market crash can be the result of major catastrophic events, ...
  3. Financial Crisis

    A situation in which the value of financial institutions or assets drops rapidly. A financial crisis is often associated ...
  4. Election Period

    The period of time during which an investor who owns an extendable or retractable bond must indicate to the issuer whether ...
  5. Shanghai Stock Exchange

    The largest stock exchange in mainland China, the Shanghai Stock Exchange is a nonprofit organization run by the China Securities ...
  6. Dead Cat Bounce

    A temporary recovery from a prolonged decline or bear market, followed by the continuation of the downtrend. A dead cat bounce ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!