What Is an Escrow Account and How Does It Work?

An escrow account acts as a neutral third party that holds funds and documents during a real estate transaction. It ensures that both the buyer and seller meet all contractual obligations before the deal closes.

During the process, the buyer’s earnest money, lender funds, and closing documents are held in escrow. Once all conditions are satisfied — including inspections, title clearance, and financing — the escrow officer releases the funds and records the deed.

In my experience, escrow provides security for everyone involved. It guarantees that no money changes hands until all requirements are fulfilled, protecting both the buyer and seller from risk during one of life’s biggest financial transactions.