What is Escrow
Escrow is a service which provides the public with a means of protection in the handling of funds and/or documents. In the escrow, all parties involved give their instructions to this neutral intermediary, the “escrow holder” whose duty it is to assure that no funds or property will change hands until all instructions have been carried to completion.
Escrow enables the buyer and the seller to transact business with each other through a neutral party (the escrow), thereby minimizing their risk. Once a seller and potential buyer reach an agreement, it will be time to select an escrow company. When a purchase offer has been signed by both sellers and buyers and an earnest money deposit has been put into a trust account, the transaction is said to be “in escrow.”
When the escrow process is complete, the escrow service records the new deed in buyer’s name, which finalizes the transaction. Note also that funds can often be held in escrow after the close; this is common when it comes to paying contractors that may have unfinished work.
In some parts of the country an impound account can be referred to as escrow. An impound account is when the lender collects an additional amount above and beyond a home owner’s principal and interest payment to pay hazard insurance and property tax as they come due.