Escrow Agent Definition and Legal Meaning
On this page, you'll find the legal definition and meaning of Escrow Agent, written in plain English, along with examples of how it is used.
What is Escrow Agent?
n. a person or entity holding documents and funds in a transfer of real property, acting for both parties pursuant to instructions. Typically the agent is a person (commonly an attorney), escrow company or title company, depending on local practice.
History and Definition of Escrow Agent
An escrow agent is a trusted third party responsible for receiving, holding, and disbursing funds and documents relating to a property transfer. The use of escrow developed in the United States as a mechanism to protect buyers and sellers from fraud and default during a property purchase. An escrow agent is commonly an attorney, title company, or escrow company depending on local practice. The agent holds any payment until certain conditions are met, at which time the payment is released to the appropriate party.
Escrow is commonly used in real estate and is required for most mortgage loans. The escrow agent ensures that both the buyer and seller fulfill their obligations in the purchase agreement. Escrow also protects the buyer’s deposit until the completion of the transaction.
Examples of Escrow Agent
John and Mary are purchasing a house, and they deposit the down payment with an escrow agent. The agent will hold the deposit until all conditions of the sales contract are satisfied, and then disburse the funds.
When Bob refinanced his home, he established an escrow account with his mortgage company. The mortgage company used the account to pay Bob’s homeowner’s insurance and property taxes.
Alice decides to sell her small business, and establishes an escrow account with an attorney. The attorney will hold the purchase price, and release the funds when all selling conditions are met.
Legal Terms Similar to Escrow Agent
- Custodian: A person or entity responsible for holding or managing property for the benefit of another.
- Trustee: A person or entity holding and managing assets for the benefit of beneficiaries under a trust agreement.
- Fiduciary: A person or entity holding a position of trust and confidence, with an obligation to act in the best interest of another party.