In general, escrow is when a buyer commits funds towards the purchase of a property and are held by an impartial third party (not the seller or buyer). Escrow of funds can take place at several times during a residential real estate transaction.
Accepted Offer: Some markets require that the buyer provide a deposit with their offer to purchase, this is often called “earnest money” and is held in escrow. An attorney, buyer’s brokerage or title company might be the holder of these funds.
Signed Contract: When a contract is signed, a deposit accompanies the contract and those monies are held in escrow.
Hiccup at Closing: If an issue arises at the walk through or before closing that cannot be resolved by the seller by the time of closing, the buyer and seller might agree to hold a certain amount of funds in escrow. The monies would then be released after the concern is satisfied. I had this situation arise just yesterday. At the final walk through of a property, the buyer was surprised to see three outdoor urns of significant size still on the property.
The seller hadn’t thought twice about them, as they had been on the property when she had purchased it. She thought of them as part of the outdoor landscaping. The new owners, however, did not want the urns and suggested a five figure escrow until they could have the urns removed. In this case, I was able to call upon a property management company that I work closely with, who recognized the timing urgency, changed their schedule and had the urns removed by noon the following day— just in time for a smooth closing.