Escrow — Neutral Third-Party Handling

Escrow is the use of a neutral third party to hold funds and documents until all conditions of a transaction are met.

What is held in escrow:

Earnest money deposit

Buyer's down payment

Mortgage payoff funds

Deed and other closing documents

Escrow agent responsibilities:

Follow the escrow instructions exactly

Distribute funds only when all conditions are met

Never favor one party over another

Trust accounts (broker's escrow account):

Separate bank account for client funds

Never commingled with broker's personal or business funds

Must be reconciled regularly

Commingling = license violation

Conversion (using client funds for personal use) = criminal fraud

Earnest money disputes:

If buyer and seller dispute who gets the earnest money, broker must hold it until both parties agree or a court orders distribution.

Broker cannot just give it to seller because seller demands it.

Reference:

Wikipedia: Escrow

https://en.wikipedia.org/wiki/Escrow