Escrow is a neutral third party that carries out the instructions of both the buyer and seller in a real estate transaction.
The escrow agent may be an attorney or a title officer, depending on local laws and customs.
Before the actual transfer of property from seller to buyer, money may be deposited into escrow. The agent monitors this account and upon completion of certain contractual obligations, such as passing a home inspection, the money is deposited into the seller’s account.
Escrow may also refer to an account held by a mortgage lender into which the homebuyer pays money each month for property tax and insurance payments. The lender than pays these items on the borrower’s behalf as they come due. Escrow accounts can be beneficial for borrowers. First, escrow accounts can help ensure that all of your required payments are made. And instead of managing due dates yourself, your mortgage lender does it for you. Also, since you pay each month, you don’t have to scramble for cash at the last minute when your insurance and taxes are due.