Escrow Definition

An escrow is a deposit of money or property by one party (the ‘escrow agent’) to a second party (the ‘principal’), with the understanding that the deposit will be held by the escrow agent until specific conditions have been met. The most common use of escrow is in real estate transactions, where the buyer deposits money with an escrow company to be held until the seller provides proof that he or she has delivered the deed to the property.

An escrow can also be used to hold funds in other types of transactions, such as stock trades. In this case, the funds are held until both parties have fulfilled their obligations. For example, if Company A is selling 100 shares of stock to Company B, Company A may place the 100 shares in an escrow account. Once Company B has paid for the shares, the escrow agent will release them.