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What is an escrow account?

In the case of a real estate transactions, escrow is a third party account that acts as a holding cell for safekeeping important documents. There are two types of escrow accounts in real estate – mortgage escrows and real estate escrows.

    1. Mortgage escrow: An account the mortgage lender establishes to pay for certain property-related expenses on behalf of their clients, monthly installments for taxes, insurance. These are used so that the lender makes sure that taxes and insurance are being accounted for.
    2. Real Estate Escrow: This account keeps critical documents secure until closing. Some of the items held in the 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.

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