Escrow

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What is 'Escrow'

An escrow is 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.

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.

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RELATED FAQS
  1. Who manages an escrow account?

    Managing an escrow account is a job for a trusted and experienced service provider. Discover the best personal finance solutions ... Read Answer >>
  2. Does the bank set up an escrow account for the buyer and seller in a home sale?

    Learn about the process of escrow and who is responsible for setting up escrow accounts for the buyer and seller in the purchase ... Read Answer >>
  3. How does the bank profit off of escrow accounts?

    Discover the truth behind escrow accounts and the bank's profits. Are these accounts worthwhile or just another way for the ... Read Answer >>
  4. Do landlords set up escrow accounts for their tenants' security deposits?

    Learn when and why landlords place rental property security deposits in separate escrow accounts to make sure the money is ... Read Answer >>
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    Understand how FHA mortgages require escrow accounts for property taxes, homeowners insurance and mortgage insurance premiums ... Read Answer >>
  6. Can I avoid capital gains tax on an undeveloped lot?

    I have an undeveloped lot that is going into escrow. I am 66 and semi-retired. The lot cost $12,000 ab... Read Answer >>
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