I have had escrow explained to me three times just now by three different people and I still don’t quite get it.
In: Economics
It’s an account where money is held by a neutral third party, to be distributed to the appropriate recipient at the time at which all parties agree. Basically, it babysits the money.
It’s most commonly encountered in real estate. An escrow accounts used for funds placed during the purchase process to show the buyer’s serious intent while preventing the seller from getting access until the conditions of the sale are completed and sale closes. Sometimes you’ll even hear the period between a property going under contract (buyer and seller agree on price) through closing (usually 30-60 days later, once inspections have been completed, buyer financing has been approved) as being in escrow.
Once you own property, your mortgage company sets up an escrow account where they set aside part of each month’s mortgage payment to pay your annual homeowners insurance premium and your property taxes.
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