MONEY AND FINANCE

What Escrow Means

What Escrow Means

Escrow is a term most people associate with real estate. However, this a very limited view. Escrow is actually a legal document such as a deed or money or stock or other property delivered by the grantor, promisor or obligor into the hands of a third person.

The third person, commonly called an escrow officer, is to hold the thing in escrow until the happening of a contingency or performance of a condition. Once this happens, the escrow officer will make delivery to the grantee, promisee or obligee.

If this sounds complicated or too complex, think of escrow as a system of document(s) transfer –no matter what the document(s)- a deed, bond, stock, funds or other property is delivered to a third person to hold until all conditions in the contract are fulfilled.

The original contract dictates the terms of the escrow as well as the terms of the transfer. In other words, it is the agreement between buyer, seller and escrow holder that sets the rights and responsibilities of each party before anything can happen.

The umbrella under which all of this takes place is called an escrow account. All parties place their respective instruments into this account under the stewardship of the escrow officer.

Sometimes escrow can as simple as a handshake. If you have ever been involved in an agreement with a friend to deliver an item to his house at which time he will pay you a set amount, then you’ve been involved in what is a verbal escrow with you as the escrow officer.

You had the item and he had the money but you couldn’t get the money until you delivered the item. Granted, this is very informal and people don’t look at it as an escrow transaction. However, that doesn’t make it any less of an escrow transaction.

Escrow can involve multiple parties such as with deeds and stocks or it can involve as few as two as in the case of you and your friend. Regardless, escrow is still escrow and carries with it rights and responsibilities that must be adhered to for the system to work properly. And now you know what escrow means




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