Why is money held in an escrow account?

Escrow is a legal arrangement in which a third party temporarily holds large sums of money or property until the closing has been satisfactorily completed. When Preferred Title of Colorado conducts a closing, we often act as the neutral, third party and manage the escrow accounts until all funds have been dispersed. 

Sometimes, we hold funds in the escrow account past the date of closing as an escrow holdback. There are several reasons to hold escrow funds: Perhaps you agreed that the seller can stay in the home an extra month. Or maybe you found something wrong with the property during the final walk-through. In these examples, funds would need to stay in escrow until all issues have been settled.

In real estate, escrow is typically used for two reasons:

  • To protect the buyer’s deposit so the money can be properly dispersed at the closing's conclusion
  • To safely hold the new property owner's funds for taxes and insurance


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