Escrow

In depth

Escrow refers to either a closing escrow, where a neutral agent holds money and documents until closing conditions are satisfied, or an ongoing escrow account, where a loan servicer collects monthly amounts for taxes and insurance. Misconception: escrow is not optional fluff; it protects both parties by ensuring no one performs without the other. Practically, in FSBO and seller-finance transactions, using a title company or attorney as escrow agent prevents disputes over earnest money, recording, and proration of taxes. Ongoing escrow accounts for taxes and insurance protect the seller-financier from tax liens and insurance lapses that could destroy collateral. RESPA limits escrow cushion amounts and requires annual analysis statements when consumer loans are involved.