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 Oregon, an escrow account is commonly used in real estate transactions to hold funds or documents until the completion of the sale or fulfillment of contractual obligations. The escrow agent, a neutral third party, is responsible for holding and regulating the payment of the funds required for two parties involved in a transaction. Oregon law requires that escrow agents and escrow companies be licensed under the Oregon Division of Financial Regulation. They must comply with regulations that ensure the protection of consumer funds and the proper execution of escrow transactions. The escrow process in Oregon is governed by state statutes, which outline the duties and responsibilities of the escrow agent, including holding the property in trust and not for their benefit, and ensuring that the property or documents are transferred to the appropriate party upon fulfillment of the escrow conditions. This ensures that the transaction is conducted fairly and securely, protecting the interests of all parties involved.