Escrow

What Is Escrow? Escrow is a legal and financial mechanism where a trusted third party (the escrow agent) temporarily holds money, property, or documents until predetermined conditions of a transaction are fulfilled. The escrow agent releases the held assets only when both parties have satisfied their respective obligations, providing security and trust in the transaction. ## Common Uses of Escrow - Real estate transactions (holding earnest money deposits) - Mergers and acquisitions (holding purchase price pending due diligence) - Online marketplaces (protecting buyers and sellers) - Intellectual property licensing (holding royalty payments) - Construction projects (retainage escrow) ## How Escrow Works The parties enter into an escrow agreement that defines the conditions for release of the held assets. The escrow agent has a fiduciary duty to both parties and must follow the escrow instructions precisely. If a dispute arises, the escrow agent typically holds the assets until the parties reach agreement or a court issues an order. Escrow fees are usually split between the parties or paid by one party as negotiated.