Process

• Pending escrow is the process by which money and property documentation is held by an objective third party company for the purposes of facilitating a transaction between a buyer and a seller contingent on both parties meeting the terms and conditions of the purchase agreement involved in the transaction. Once the buyer and seller have agreed on a price for the property, and a pending sale is established, an escrow account is opened. A contract is signed contingent upon a receipt of funds from the buyer. The money from the buyer is placed in escrow along with property documents from the seller. An escrow company manages the escrow account.
  
  

Significance

• An escrow company acts as a neutral third party. The escrow company holds the property and the money to ensure that both parties to the contract are treated fairly and that the terms of the contract are carried out without fraudulent activity being committed on either side of the transaction. The escrow company is able to do this merely by making sure that the transaction goes smoothly and that neither the money nor the property is withheld from either party during the process. In essence, the escrow company guarantees that the transaction will take place as long as the terms of the contract are met by both individuals involved in the transaction.
  
  

Benefit

• The benefit to both parties is that the buyer doesn't need to worry about being cheated out of the money he gives to the seller. Likewise, the seller is ensured that he is paid in full for the property. Neither party in the transaction needs to worry about losing but just focuses on meeting his end of the deal.
  
  

Consideration

• An escrow is one of the final stages of the real estate transaction. However, it doesn't guarantee the sale of the property. It only guarantees that the transaction will be completed if the terms of the contract are met. If the buyer backs out of the transaction due to lack of financing or there is no cash for the transaction to take place, then the sale will not be completed. The escrow company cannot legally enforce the contract.