Escrow

Escrow is an arrangement where a neutral third party holds money or documents for a buyer and seller and releases them only when the agreed conditions are met. In a home purchase, the escrow holder keeps the earnest money and later handles the closing funds.

When a buyer wires $10,000 in earnest money on a $500,000 home, the money normally goes into an escrow or trust account, not to the seller. Neither side can pull it back on their own. The holder pays it out at closing or as the contract and the parties direct.

The word also gets used for the period between an accepted offer and closing ("we are in escrow") and for the account a lender uses to pay property taxes and insurance. Those are different things, which is why people ask whether earnest money is the same as escrow.