Escrow

Definition

Escrow is a legal arrangement where a neutral third party (title company, attorney, or escrow agent) holds funds and documents during a transaction until contractual conditions are met. On a real estate purchase, escrow opens when the offer is accepted and closes (releases the funds to the seller and the deed to the buyer) only when contingencies are satisfied and both parties sign closing documents. Lenders also use ongoing 'tax & insurance escrow' accounts to collect 1/12 of annual property tax + insurance each month and pay the bills directly.

Worked example

Offer accepted on $300,000 purchase. $5,000 earnest money wires into escrow. Inspection contingency, financing contingency, and appraisal contingency are satisfied over 21 days. Buyer wires remaining funds. Seller signs deed. Escrow releases funds to seller, records deed in buyer's name, and closes — typically a 30–45 day timeline.

How DealIntel uses it

DealIntel models escrow timelines as part of the closing-cost projection and surfaces typical escrow timelines per metro (Texas and California average 30 days; Northeast often runs 45–60 days). Slow escrow markets affect IRR through extended capital deployment timelines.

Related terms

• Closing CostsTransaction costs paid at acquisition and at sale — typically 2–4% on the buy side and 5–7% on the sell side.
• Title InsuranceInsurance that protects against losses from defects in property title — paid once at close, covers the duration of ownership.

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