Some financial terms are easy to understand, like “money” or “savings account.” Other terms, though, can be a bit harder to understand, like “escrow.” You might have seen this term, especially if you’ve bought a house, where payments often get deposited into an escrow account.
So what exactly is an escrow account and how does it work? Where does the name come from and does it in fact have anything to do with crows, as the name suggests?
So What is It?
An escrow account is basically a bank account where a buyer and seller can deposit money before their transaction is completed. Usually, this is done because there are certain conditions that have to be met before the money changes hands. An independent third party typically owns the escrow account. The third party can be a financial institution, such as a bank or credit union, but it can also be an independent company, or even a service a title company offers to make the home buying process easier.
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