An escrow is an arrangement in which a disinterested third party holds legal documents and funds on behalf of a buyer and seller and distributes them according to the buyers' and sellers' instructions.

People buying and selling real estate often open an escrow for their protection and convenience. The escrow holder is relied upon to faithfully carry out their mutual instructions relating to the transaction and to advise them if any of their instructions are not mutually consistent or cannot be carried out.

An escrow is convenient for the buyer and seller because both can move forward separately but simultaneously in providing inspections, reports, loan commitments, funds, deeds, and many other items, using the escrow holder as the central depositing point. If the instructions from all parties to an escrow are clearly drafted, fully detailed and mutually consistent, the escrow holder can take many actions on their behalf without further consultation. This saves much time and facilitates the closing of the transaction.