Escrow or an escrow account—also known as an impound account or a reserve account—is a legal document that transfers possession or ownership of a legal document or property to a third party who is not a party to the underlying transaction that the escrow is intended to secure.

For example, escrow or an escrow account may be used to secure a transaction for the sale of real property (a warranty deed held in escrow) or for a loan to purchase real property (a deed of trust transferring ownership to the escrow).

Escrow or an escrow account might also refer to a bank or other account that holds money or other property (earnest money) while the parties to the underlying transaction are in the process of completing the transaction and fulfilling their contractual obligations.

An escrow agreement requires the escrow or escrow agent (a person or entity) to hold a document or property in trust for a specified amount of time or until the occurrence of a certain condition (full payment) or until both parties to the underlying transaction have fulfilled their contractual obligations—at which time the escrow agent is to hand over the document or the property to the grantee (buyer of real property) or the mortgagee (lender for purchase of real property), for example.

An escrow is like a trust account in that the escrow agent holds the document or property in trust for the benefit of another person and not for the benefit of the escrow agent. Although the person or entity that holds the property in trust under the terms of an escrow is often referred to as an escrow agent, they are not an agent with authority to act on behalf of and bind or obligate a certain person (a principal) as an agent is traditionally empowered to do under a state’s common law (court opinions or case law).

In Hawaii, escrow accounts are commonly used in real estate transactions to ensure that the transfer of property is conducted smoothly and securely. An escrow account is managed by a neutral third party, known as an escrow agent, who holds documents or funds on behalf of the transacting parties until certain conditions are met, such as the fulfillment of contractual obligations or the completion of a property sale. The escrow agent's role is to protect all parties involved by ensuring that no property or funds change hands until all terms of the agreement are met. Hawaii Revised Statutes Title 25, Chapter 449-1 to 449-20, governs escrow depositories and sets forth the requirements for licensure and regulation of escrow depositories in the state. These statutes outline the duties and responsibilities of escrow agents, including the proper handling and accounting of escrow funds, and the conditions under which these funds may be disbursed. It is important to note that while escrow agents hold property in trust, they do not have the same authority as traditional agents to act on behalf of the principals in the transaction.