What are escrow accounts?
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It is an account held by a third person in our exchange. So if I am buying something and you are selling something, like a car, then I would actually give the money to the escrow account until the car is delivered and I can make sure it’s as you described. You can see that I put real money into the account, so you ship the car, then I get the car and it looks good so then I release the money and you get it. It helps protect both of us.
It is even MORE common for mortgages (house loans). On top of the loan you also usually have to pay property tax and homeowner’s insurance. You can get an escrow set up with the loan bank so that you just make *one* mortgage payment a month – some of that money will go to the escrow which then goes to pay the insurance and the taxes. It is easier for *you* (you don’t have to manage three different bills) and it is safer for the bank (since they don’t have to worry about you missing a tax payment and then something happens to the property they also partially own).
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