LawMeaning

Escrow

From the Latin From Old French 'escroue,' meaning a scroll or strip of parchment..

In one sentence

Money or documents held by a neutral third party until transaction conditions are met.

Plain English

Escrow is a holding arrangement where a neutral party—often a bank, title company, or attorney—temporarily holds money or documents on behalf of both the buyer and seller. The escrow agent releases the funds or documents only when all agreed-upon conditions are satisfied, protecting both parties. For example, in a home sale, the buyer's down payment goes into escrow until the inspection passes and the title is clear. This reduces risk because neither party can access the money until everyone's obligations are fulfilled.

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Example

When buying a house, you deposit $50,000 with an escrow agent. The seller deposits the deed. Once your inspection is complete, financing is approved, and all closing conditions are met, the escrow agent releases your money to the seller and the deed to you.

Used in a sentence

“The purchase agreement required the buyer to place the earnest money in escrow until closing.”

Related terms

Lien
A legal claim against property to secure payment of a debt or obligation.
judgment
The court's final decision in a criminal case, determining guilt or innocence and imposing sentence.
Acceptance Upon Performance
Accepting a contract by actually doing what was requested rather than saying yes.
Conditions Precedent
An event that must happen before a party's obligation under a contract kicks in.
Performance
The act of doing what a contract requires, such as delivering goods or paying money.
Homestead Exemption
A legal protection that shields a primary residence from creditors' claims up to a certain value.
Tenant Rights
Legal protections and entitlements that renters have regarding their leased property and living conditions.
Security Deposit
Money a tenant pays upfront to a landlord as a guarantee against damage or unpaid rent.

This page is a plain-English reference and is not legal advice. Laws vary by jurisdiction and change over time. For specific situations consult a licensed attorney.