Neither buyer nor seller wants the other to hold the earnest money or the deed before all conditions are satisfied. A neutral third party therefore holds the funds and documents until every requirement is met. That arrangement is escrow.

Escrow officers follow written instructions from both sides. They collect the down payment, loan funds, and closing costs, pay off existing liens, and arrange for recording. Only when all conditions are satisfied do they disburse money and release documents.

Escrow protects both parties from premature performance. In some states attorneys handle the same function. Disputes over whether conditions have been met can freeze escrow until resolved. A competent escrow officer keeps the transaction organized and reduces the chance of funds or documents going astray.

Escrow turns a sequence of promises into a simultaneous exchange.