Escrow
An arrangement where a neutral third party holds funds or assets until specified conditions are met.
Escrow arrangements provide security for both parties in a transaction. The funds or documents are released only when predetermined conditions are fulfilled, reducing the risk of fraud or non-performance.
Escrow is commonly used in real estate transactions, business acquisitions, and large service contracts where significant sums are involved.
Example
In a home purchase, the buyer deposits funds into escrow, which are released to the seller only after the title transfer is complete and all inspection contingencies are satisfied.
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