An escrow is a deposit of funds by one party for the delivery to another upon fulfillment of contractually-agreed upon conditions.
Whether you are the buyer, seller, lender, or borrower, you want the assurance that no funds or property will change hands until all agreed upon conditions have been met. The escrow holder has the obligation to safeguard the funds and/or documents and to disburse funds only when all provisions of the escrow have been met. In a real estate transaction all parties involved enter an escrow; once all terms of the agreement have been met and all proper title documents have been signed, then an escrow can close, allowing all parties to receive what they are entitled based on the terms of the transaction. A buyer of a home receives keys and his/her name on the title of the home, for example, while a seller receives the funds for the sale price and the lender receives borrower loan package documents. Escrow is most commonly known in the context of real estate, but other types of escrow include internet escrow, banking escrow, and intellectual property escrow.