Transactions
What is escrow?
Escrow is an arrangement where a neutral third party holds funds and documents on behalf of a buyer and seller, releasing them only once every agreed condition of the sale has been satisfied.
Escrow removes the need for either side to trust the other with sequencing. The buyer's deposit is held by someone with no stake in the outcome, and the seller knows the money exists without having to receive it before transferring title.
The escrow holder — a company, attorney or title agent depending on jurisdiction — follows written instructions derived from the contract and has no discretion to favour either party.
The term is also used for post-closing escrow accounts, where a lender holds monthly contributions toward property taxes and insurance. Same principle, different purpose.
Related terms
A contingency is a condition written into a purchase contract that must be met for the sale to proceed, allowing the buyer to withdraw without losing their deposit if it is not.
A property is under contract when a seller has accepted an offer and both parties are bound by a purchase agreement, but the sale has not yet completed because contingencies or closing steps remain.
Title insurance protects a buyer or lender against financial loss from defects in a property's ownership record — undisclosed heirs, forged documents, unpaid liens or boundary errors that surface after purchase.
Closing costs are the fees and charges payable at completion of a property sale, separate from the purchase price — typically including loan origination, title, escrow, recording, and prepaid taxes and insurance.