Definition
Escrow
Escrow is a neutral third party — usually a title company or attorney — holding money and documents until both sides of a sale have performed. The buyer's funds sit in escrow until closing, when the escrow agent pays off liens, disburses proceeds, and records the deed.
Escrow exists so that neither side has to trust the other: the seller doesn't hand over a deed hoping to be paid, and the buyer doesn't hand over cash hoping to get a house. In a legitimate sale, money never passes directly between buyer and seller.
The same mechanism protects heirs splitting proceeds — the escrow agent disburses each share per the closing instructions with a paper trail, which is why estate sales close through title companies even when the buyer is paying cash.
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