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What Is Escrow?

Escrow refers to a third-party service that is usually mandatory in a home purchase. When a buyer and seller initially arrive at a purchase agreement, they select a neutral third party to act as the escrow agent. Escrow agent collects what is known as “earnest money” from the buyer: a deposit that is equal to a small percentage of the sales price. In exchange, the seller takes the property off-market. Until the final exchange is completed, both the buyer’s deposit and the seller’s property are said to be in escrow.