Escrow describes the process whereby funds and/or ownership documents for assets are held by a trusted third party who will distribute them to relevant parties accordingly once certain conditions are fulfilled.
These business practices help to keep all parties involved in a deal feel safe about their assets and money, especially when they are dealing with each other for the first time.
For example, it is common for funds to be released to a seller only when a buyer has received and verified the product that he has paid for.
There is always a possibility that a seller would refuse to close after receiving funds from a sale and leave the buyer in shock.
Sure, a buyer can take such a case to court.
But why go through all that fear and hassle when an affordable escrow service would prevent such problems from occurring in the first place.
Something to take note that an escrow account usually means a different thing.
While we would intuitively associate an escrow account with the account an escrow service company uses to hold the funds for their transactions, in practice escrow accounts to refer to an account a borrower keeps with a lender to fund tax and insurance payments.