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Simple English definitions for legal terms
escrow account
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A quick definition of escrow account:
An escrow account is a special bank account where money is held until certain conditions are met. For example, if you are buying a house, the money for the house may be held in an escrow account until all the paperwork is completed and the sale is finalized. This helps protect both the buyer and the seller. Escrow accounts can also be used for other types of transactions, like paying property taxes or insurance.A more thorough explanation:
An escrow account is a bank account that is held by a third party, usually an escrow agent, until certain conditions are met. The account is returnable to the depositor or paid to a third person on the fulfillment of specified conditions. It is also known as an escrow deposit.
For example, when buying a house, the buyer may put the money for the purchase into an escrow account until the seller has completed all necessary repairs and paperwork. Once the conditions are met, the money is released from the escrow account to the seller.
Another example is an impound account, which is an account of accumulated funds held by a lender for payment of taxes, insurance, or other periodic debts against real property.
Overall, an escrow account is a useful tool for ensuring that all parties involved in a transaction fulfill their obligations before the money is released.