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
The escrow is like an “exchange point”. Usually needed when large transactions occur that require both parties to be satisfied that all the details of the transaction are satisfied. When you purchase a house, your purchase is usually covered by a contract that specifies many terms (you get the loan funded, deposits are paid, house passes inspection, no outstanding liens, defects are rectified etc etc). Since neither party has “trust” in the other party a “trusted” third party (could be a bank, lawyer or other group) is appointed that is neutral and ensures that all details that both parties must perform are accomplished before completing the transaction.
“being in escrow” means that one or both parties are in the process of satisfying the contract. Once everything is accomplished, the third party, then “completes” the transaction and the escrow is extinguished.
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