Escrow 101: Definition & Uses img

Escrow 101: Definition & Uses

calender icon 1/19/2022    poster icon  Mark Goodman

Many people have questions about how exactly escrow works. Even those who may be party to an escrow arrangement may not have a firm grasp on how it actually operates. This article is all about escrow – its definition, uses, and benefits!

What is Escrow?

First thing’s first – what exactly is escrow? Put simply, an escrow is an agreement between two (or more) parties and a neutral third party in which the neutral third party holds money or documents on behalf of one of the other parties. Escrow arrangements are often necessary when the obligation of a specific party won’t be satisfied until after the closing date of a transaction.

Escrow can take many different forms, depending on the needs of those entering into the escrow arrangement. Here are a few common examples of how escrow can be used:

  • A mortgage that will be fully paid off at a later date – such as a 30-year home mortgage.
  • An outstanding tax obligation.
  • A matter that is in the process of being negotiated.

When Title Companies Use Escrow

Title companies frequently utilize escrow arrangements. For example, if at the closing table the involved parties have a dispute that cannot be resolved, the title company will act as the neutral third party and hold any necessary documents or funds until the issue at hand can be resolved.

Commercial Partners in Minneapolis, MN

Want to learn more about the commercial title process? We’ve got you covered! The experts at Commercial Partners Title Company have decades of experience facilitating commercial real estate transactions across the United States. We can help guide you through the entire commercial title process and make sure you have everything prepared for the closing table. Contact us today at our Minneapolis offices to learn more about our services and how we can help with your next commercial transaction.