Escrow or an escrow account—also known as an impound account or a reserve account—is a legal document that transfers possession or ownership of a legal document or property to a third party who is not a party to the underlying transaction that the escrow is intended to secure.

For example, escrow or an escrow account may be used to secure a transaction for the sale of real property (a warranty deed held in escrow) or for a loan to purchase real property (a deed of trust transferring ownership to the escrow).

Escrow or an escrow account might also refer to a bank or other account that holds money or other property (earnest money) while the parties to the underlying transaction are in the process of completing the transaction and fulfilling their contractual obligations.

An escrow agreement requires the escrow or escrow agent (a person or entity) to hold a document or property in trust for a specified amount of time or until the occurrence of a certain condition (full payment) or until both parties to the underlying transaction have fulfilled their contractual obligations—at which time the escrow agent is to hand over the document or the property to the grantee (buyer of real property) or the mortgagee (lender for purchase of real property), for example.

An escrow is like a trust account in that the escrow agent holds the document or property in trust for the benefit of another person and not for the benefit of the escrow agent. Although the person or entity that holds the property in trust under the terms of an escrow is often referred to as an escrow agent, they are not an agent with authority to act on behalf of and bind or obligate a certain person (a principal) as an agent is traditionally empowered to do under a state’s common law (court opinions or case law).

In Arkansas, escrow accounts are commonly used in real estate transactions to ensure that both the buyer and seller meet their obligations before the transfer of property is completed. An escrow account holds funds, such as earnest money, or documents, like a deed, in trust until specific conditions are met. The escrow agent, which can be a title company, attorney, or other designated third party, has the fiduciary responsibility to manage the escrow account and ensure that the terms of the escrow agreement are followed. The agent cannot act on behalf of either party beyond the scope of the escrow instructions. Once all conditions are satisfied, such as the buyer securing financing and the seller providing clear title, the escrow agent will facilitate the transfer of funds and documents to the appropriate parties. Arkansas state statutes and federal laws regulate escrow accounts to protect the interests of all parties involved in the transaction. It's important for parties entering into an escrow agreement in Arkansas to understand their rights and obligations under the agreement and to ensure that the escrow agent is properly licensed and follows state regulations.