Escrow Agreement

Escrow Agreement

An escrow agreement is a legally binding arrangement in which a third party, known as the escrow agent, holds funds, documents, or other assets on behalf of two or more parties involved in a transaction. This agreement ensures that certain conditions are met before the assets are released, providing security for both buyers and sellers.

In an escrow agreement, the parties to the transaction agree to specific terms that outline what conditions must be fulfilled for the escrow agent to release the assets. Common scenarios for using an escrow agreement include real estate transactions, where the buyer deposits earnest money with the escrow agent until the sale is completed, and online sales, where escrow services protect both the buyer and the seller during the transaction.

For example, in a real estate transaction, the buyer might deposit their down payment into an escrow account. The escrow agent will hold the funds until a title search is completed, inspections are satisfactory, and financing is secured. Once these conditions are met, the agent releases the funds to the seller, completing the transaction. If any issues arise, the escrow agent can return the funds to the buyer, ensuring a level of protection throughout the process.