What is an escrow account?
In the case of a real estate transactions, escrow is a secure third party account used fandor holding important documents. There are two types of escrow accounts in real estate – mortgage escrows and real estate escrows.
Mortgage escrow: An account the mortgage lender establishes to pay for certain property-related expenses on behalf of their clients, monthly installments for taxes, and insurance. These are used so that the lender assures that taxes and insurance are being accounted for and not used for any other purposes.
Real Estate Escrow: This account keeps critical documents secure until closing. Some of the items held in an escrow account include the earnest money check, the funds, instructions, and any paperwork necessary for the pending transaction.
For a more detailed look at escrow accounts including how they work and what happens if a sale falls through, visit our blog post on What is an Escrow Account: How it Works in Real Estate.