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Glossary term

Escrow

Definition

Escrow is when a neutral third party holds money or documents until everyone meets the agreed conditions.

Technical definition

Escrow is an arrangement in which a third party holds funds or documents on behalf of transacting parties, releasing them once specified conditions are satisfied.

Why it matters

Escrow protects both buyer and seller during a transaction and may also be used to hold funds for taxes or insurance on some loans.

Example

Earnest money on a land purchase may sit in escrow until closing.

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