Escrow is a term used in real estate transactions that would appear to have several meanings. It actually has one meaning that applies to a handful of situations in real estate.
Escrow is a provision made between parties in a transaction for the 
disbursement of funds and documents. Escrow will be managed by an unbiased, independent, trusted third party who has no interest in the transaction. Escrow will often involve a trust account. A trust account is a special account to hold money that will be distributed upon close of the transaction.
That being said lets discuss the different ways that the term escrow is used in real estate transactions.
“The house is in escrow.” Escrow is the process that takes place between the time an agreement is signed and the time the deal closes. In real estate transactions there are many steps that need to take place before the deal can close. This will require a knowledgeable third party to ensure everything happens in proper order and in a timely manner. This process is performed by a closing agent. The closing agent is paid from closing costs.
“The money is in escrow.” This is when money is in a trust account and does not get released to either party until the conclusion of the transaction. The money cannot be put into a general business checking account and comingled with other funds. The escrow company cannot benefit from the use of this money in any way, to include collecting interest on it.
“We are going to escrow.” In this example the term is not used entirely correctly. What they are calling “escrow” actually means signing closing documents. Closing consists of; signing, funding, recording and possession. It is not uncommon for this process to go into the next business day.
“The loan will have an escrow account” An escrow account; sometimes called an impound account, is money that the lender collects and sets aside for insurance and property taxes. Not all loans require escrow accounts. When your loan has an escrow account, your monthly payment will include principal and interest as well as the monthly portion of taxes and insurance. This will often be referred to as PITI.
“The owner financing will be handled by an escrow company” There are escrow companies that specialize in managing distribution of funds in owner financed transactions. This service will include collecting payment from the buyer, insuring that taxes are kept up to date, maintaining insurance on the property and paying the seller. This is designed to protect both parties and the property.
Reviewing the meaning of escrow, it is clear to see how one term can apply to several different situations involved with closing real estate transactions.
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buyer's closing costs.
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