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Definition: Escrow is a process where sellers and buyers give funds and documents to a neutral third party for disbursement to the parties upon completion of terms and conditions. When a purchase offer has been signed by both sellers and buyers and an earnest money deposit has been put into a trust account, the transaction is said to be "in escrow." In some parts of the country, escrow has a different meaning. It means the lender collects an additional amount above and beyond a home owner's principal and interest payment to pay property taxes and hazard insurance premiums as they come due. This is known as an impound account but is often referred to as escrow. Typically the amount collected is greater than the premium divided by 12 months because lenders like to keep a reserve.

At the time of writing, Elizabeth Weintraub, DRE # 00697006, is a Broker-Associate at Lyon Real Estate in Sacramento, California.

Examples:
When a purchase agreement has been signed by all parties, the transaction is said to go into escrow.

Or the Smiths pay Wells Fargo $950 a month, which includes $100 for taxes and insurance.

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