Escrow

A neutral third-party account that holds funds or documents until specific conditions are met.

Two common uses in real estate. (1) Closing escrow: a title or escrow company holds the buyer's earnest money and the closing funds, and disburses to the seller only when title, financing, and contract contingencies are all cleared. (2) Mortgage escrow: the lender collects monthly amounts for property tax and insurance with each mortgage payment, then pays those bills as they come due. The mortgage escrow protects the lender's collateral; investors sometimes opt out (where permitted) to manage cash flow directly.