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 New York, an escrow or escrow account is a financial arrangement where a third party holds and regulates payment of the funds required for two parties involved in a given transaction. It helps make transactions more secure by keeping the payment in a secure escrow account which is only released when all of the terms of an agreement are met as overseen by the escrow company. Escrow accounts are commonly used in real estate transactions to hold the buyer's earnest money, in mortgage transactions where lenders hold funds for property taxes and insurance, and in the sale of businesses or personal property. New York State law requires that escrow agents must be licensed and regulated, ensuring that they act in a fiduciary capacity and comply with specific regulations designed to protect the parties involved in the transaction. The New York Department of Financial Services oversees the licensing and regulation of escrow agents. The use of escrow accounts in real estate transactions is also governed by Real Property Law, which sets forth the conditions under which escrow funds must be held and released.