Escrow
When money or documents are held by a neutral third party until conditions are met. In real estate, earnest money sits in escrow, and in some states the whole closing process is called escrow.
Every term like this one lights up in the step you're on.
Free to set up. No credit card.Part 1 of 4
Why a seller cares
A neutral third party holds the money and the paperwork until both sides have done what they promised. It is why the buyer's deposit does not sit in anyone's personal account, and why closing money moves the way it does.
Part 2 of 4
A simple example
The buyer's $6,000 earnest money goes to the title company's escrow account. At closing the same account receives the buyer's loan funds and pays your mortgage off before the rest comes to you.
| What goes into escrow | What comes out, and when |
|---|---|
| The buyer's $6,000 deposit | Credited to the buyer at closing, or refunded, or forfeited, per the contract |
| The buyer's loan funds | Your mortgage payoff, the fees, then your proceeds, all on closing day |
| Your signed deed | Recorded once the money is in, never before |
Escrow is the reason nobody hands anybody money directly. Everything meets in the middle and leaves together.
Part 3 of 4
What people get wrong
That escrow is a company. It is an arrangement; the title company, an escrow company or an attorney holds things in escrow.
Part 4 of 4 · where to read next
Where it appears in the sale
What a definition is, and what it isn't
Keighbor is a software company, not a law firm, brokerage, or tax adviser. This is general information, not legal, tax, financial, or real estate advice about your sale. Your situation may differ. Before acting on a contract, disclosure, title, tax, or pricing question, ask an appropriately licensed professional in your state.
Written and researched by Keighbor Research · drawn from the reference glossary · how we research and check what we publish
One piece of your sale. Here is where all the pieces live.
In your room, this word explains itself where it appears.
Keighbor keeps your whole home sale in one place and defines every term like this one right where you meet it, in the step you're on. Free to set up, with or without an agent.