escrow

Escrow is a financial arrangement in which a neutral third party holds funds or assets on behalf of two or more parties until predefined conditions are met. The escrow agent's role is to ensure that obligations described in the escrow agreement are satisfied before releasing assets.

Typically, the buyer and seller execute an escrow agreement, deposit funds or assets with the escrow agent, and then the agent verifies conditions such as delivery of goods, transfer of title, or completion of services. Once conditions are met, the agent disburses funds or transfers ownership according to instructions. If conditions are not met, funds are returned or the dispute is resolved according to the agreement. The agent may charge fees and must act impartially.

Common applications include real estate closings, where funds and title documents are held until closing; online marketplaces and freelance platforms, where buyers and sellers use escrow to protect against fraud; software or IP escrow arrangements to protect licenses; and financial services for tax and insurance escrow accounts.

Escrow arrangements are governed by contract law and, in many jurisdictions, by statutory or regulatory frameworks for escrow agents or trust companies. Parties should ensure the escrow instructions are clear, specify dispute resolution, and rely on reputable, licensed providers to reduce risk.