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 Massachusetts, an escrow or escrow account is commonly used in real estate transactions to hold funds or documents until the completion of a sale or fulfillment of contractual obligations. The escrow agent, which can be a neutral third party such as a title company or attorney, holds the property, funds, or documents in trust. This ensures that the buyer's earnest money is safely held while the property sale is being finalized, and that the seller does not transfer the title until all conditions are met. The escrow agent's role is to follow the instructions of the escrow agreement and to release the funds or documents only when all terms of the transaction have been satisfied by both parties. Massachusetts law requires that escrow agents act in a fiduciary capacity, meaning they must act in the best interests of the parties involved and cannot benefit personally from the escrow assets. The use of escrow in Massachusetts is governed by state statutes and regulations, which outline the duties and responsibilities of escrow agents, as well as the requirements for establishing and maintaining escrow accounts.