Understanding Finance - What is an Escrow account?
“Escrow” is a financial asset held by a party on behalf of the other two different parties, in a transaction. The asset remains with the escrow service until the transactional obligations are fulfilled by the parties. Typically funds are kept in escrow account. Securities, funds and other assets can be held in escrow. The Escrow account providers (generally a bank) charges a commission in lieu of their services.
Example:
An escrow account can be used in the sale of a house. If there are conditions to the sale (like passing of an inspection); the buyer and seller may agree to use escrow. In this case, the buyer of the property will deposit the payment amount for the house in an escrow account held by a trusted party. This assures the seller - in the process of allowing the house to be inspected - that the buyer is capable of making payment. Once all of the conditions to the sale are satisfied, the escrow transfers the payment to the seller, and title is transferred to the buyer.
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