be

ESCROW :
What is it and how does it work?
WHAT IS ESCROW?

Escrow is a legal arrangement in which a

third party temporarily holds money or
property until a particular condition has been
met (such as the fulfillment of a purchase
agreement).
 HOW DOES ESCROW WORK?

It’s used in real estate transactions to protect both the buyer and the seller throughout the
home buying process. Throughout the term of the mortgage, an escrow account will hold
funds for taxes and homeowner’s insurance
TYPES OF ESCROW

Nowadays, escrow is often used in:

• Stocks are often issued in escrow. In this case, • In online sales an online platform acts as the
while the shareholder is the real owner of the middleman for online product sales. The buyers
stock, the shareholder has limited rights when it send the money to an escrow service, and they
comes to the disposal of the stock. hold the money until the product is received.
TYPES OF ESCROW

In real estate, escrow is typically used for two reasons:

• To protect the buyer’s good faith deposit so the • To hold a homeowner’s funds for property taxes
money goes to the right party according to the and homeowners insurance
conditions of the sale
WHO MANAGES AN ESCROW ACCOUNT?

mortgage
servicer

escrow
company

escrow
agent
ESCROW COMPANIES AND ESCROW AGENTS
MORTGAGE SERVICERS
 ADVANTAGES AND DISADVANTAGES OF ESCROW

Pros Cons
Provides protection during a transaction, notably a Higher mortgage payments (if escrow is used for
real estate transaction (which tends to be sizable) taxes and insurance)

Can allow for the monthly payment of insurance Estimates might be incorrect for the amount of
and taxes (avoiding having to pay a lump sum) taxes

Escrow is beneficial for both the buyer and seller For online transactions, escrow fees might be
when high-ticket items are involved higher than other platforms, such as PayPal
BOTTOM LINE
Escrow can be used for various transactions,
including real estate, stock issuances, and
online sales

Money from the buyer is held in an escrow

account until the transaction is complete, or
the buyer is able to receive or verify the
condition of the product. Once the buyer
agrees to the transaction the money is
released to the seller from the escrow
account.

It protects buyers and sellers during home

sales, and offers a convenient way for you to
pay for your taxes and insurance
Any questions?