Escrow

Escrow refers to a neutral party that holds something (usually money or documents) during a real estate transaction, releasing it only when specified conditions are met. The word gets used three different ways in residential real estate, and the three uses overlap, which is why it confuses almost everyone the first time.

The first meaning is the escrow period, the time between contract acceptance and closing. In western states this period is often called "in escrow"; in eastern states it's more commonly called "under contract." During this period, a neutral title or escrow company coordinates the inspections, appraisals, lien searches, and document signatures the deal requires.

The second meaning is the earnest money escrow account, which holds the buyer's deposit between contract signing and closing. The deposit sits there until either closing (when it's applied to the down payment) or contract termination (when the contingency package determines whether it returns to the buyer or goes to the seller).

The third meaning is the lender's escrow account (sometimes called an impound account) which collects monthly portions of property tax and insurance from the borrower and pays the bills directly when due.

Common gotcha: when someone says "escrow," ask which one they mean. The answer often clarifies an otherwise confusing conversation about who is holding what money and what triggers its release. The longer-form article walks through all three.