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 Washington State, escrow accounts and escrow agents are used to facilitate real estate transactions and ensure that the transfer of property is conducted smoothly and securely. An escrow account can hold funds, such as earnest money, or documents, like a deed, while a real estate transaction is being finalized. The escrow agent is a neutral third party responsible for holding these assets and is tasked with releasing them only when all conditions of the transaction have been met, such as the full payment of the purchase price. Washington State has specific regulations governing escrow agents and accounts, which are outlined in the Revised Code of Washington (RCW) under Title 18, particularly RCW 18.44. These laws set forth the licensing requirements for escrow agents, their duties, and the handling of escrow accounts. It's important to note that while escrow agents hold assets in trust, they do not have the same authority as traditional agents who act on behalf of principals; their role is limited to the terms of the escrow agreement.