Escrow is a term you will hear throughout the buying and selling process. First and foremost an escrow account is used when the deposit is placed down on the house. This escrow account is an account with segregated funds that are being held until the transaction is complete.
Generally speaking, the Sellers' attorney holds the escrow funds. Escrow is also used when discussing property taxes. Generally speaking, anyone who owns a home will be paying property taxes into an escrow account (the lender holding and disbursing those funds). At the Closing the buyer will be paying the seller for any pre-paid property taxes and the seller will have a checked mailed to them from their mortgage holder for the funds that were held in escrow.
At the Closing itself funds may be held in escrow and not disbursed to the Seller if the Seller has failed to complete any of their obligations. Whether or not funds are held in escrow will depend on the issues at hand and what agreement the attorneys can come to. Generally speaking most transactions are completed without having to put money into escrow at the Closing.
If you are told that money is being held in escrow, it is perfectly acceptable to ask whose name is on the escrow account and what bank it is being held at. This is important information to know in case you have any unresolved issues. Remember to speak to your attorney regarding escrow.
