Escrow is an arrangement in which a neutral third party, such as an escrow company, title company, or attorney, holds money and documents on behalf of the buyer and seller until all conditions of the purchase agreement are satisfied.
During a home purchase, the buyer's earnest money and later their down payment and loan funds are deposited into escrow. The escrow holder disburses funds and records the transfer of title only when both sides have met their obligations, protecting everyone from the risk of one party failing to perform.
The term is also used for mortgage escrow accounts, where a lender collects and holds money for property taxes and insurance. In real estate conversation, being 'in escrow' means a deal is under contract and moving toward closing.