Escrow

Escrow means the appointment of a trusted third party not involved in a transaction to act as an impartial in-between agent to do a certain thing upon a set of agreed upon instructions by the parties to the transaction. Most people are familiar with the concept of escrow in the context of the purchase and sale of a house. In that context, the buyer and seller agree to appoint a third party title company to hold title to the house and the purchase funds, and then exchange those items upon the go-ahead by both the buyer and seller. In the context of the purchase and sale of a business, an agent will participate to hold the buyer’s funds until certain agreed upon events take place, at which time the agent releases the title documents to the buyer and the buyer’s fund to the seller. Most title companies will not participate as agents unless the transaction is at least a minimum dollar figure. Another context in which escrow occurs is in the case of mergers and acquisitions, where the agent holds money or other assets of an acquiring company until the agent receives the proper evidence that the representations and warranties made by the target company are, in fact, true.