What is an escrow agreement for?

An escrow agreement is a legal document that defines the parameters of an escrow exchange. It names all parties involved, including the payor, payee and escrow agent. Escrow agreement may also refer to a document issued by a bank certifying securities and deposits held at that bank.

Escrow exchanges essentially require a contract between three parties that agree on a payment moving from one to another via a third party. This requires the need for a legally binding document that names conditions that should be met before the escrow agent releases funds to the payee. All fees and duties of the escrow agent are defined in an escrow agreement, since the agent is bound by contract as well.