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 Montana (MT), escrow accounts are commonly used in real estate transactions to ensure that both the buyer and seller meet their obligations before the transfer of property is completed. An escrow account holds funds, such as earnest money, or legal documents, like a deed, in trust until specific conditions are met. The escrow agent, who is a neutral third party, is responsible for overseeing the escrow process, ensuring that the terms of the escrow agreement are followed, and releasing the funds or documents to the appropriate party upon fulfillment of the contract terms. Escrow agents in Montana are regulated under state law, which includes licensing requirements and regulations that govern their conduct to protect the interests of the parties involved in the transaction. It's important to note that an escrow agent does not have the same authority as a traditional agent under common law; they cannot act on behalf of or bind the parties outside of the specific instructions provided in the escrow agreement.