Escrow accounts

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Updated: 3/27/2003 4:09 pm
When money is held by one party for another, it is usually placed in an escrow or trust account. For example, if you give a real estate broker a ten-thousand dollar deposit to purchase a house and those funds are placed in an escrow account, the broker does not have the right to use the money for his or her own purpose. Escrow money is often used to pay tax and insurance bills on property during the life of a mortgage. When purchasing a home with a new mortgage, the lender may require up to one year's worth of taxes to be placed into an escrow account to insure that there will be sufficient funds to pay the following year's taxes. Most states have licensing and bonding requirements that escrow agents must meet. For more information on escrow accounts, contact a financial or real estate professional.

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