Glossary · Finance & Payments

Escrow

Escrow is an arrangement where a neutral third party holds money or assets until agreed conditions are met, then releases them to the right party.

Updated October 6, 2026

Escrow is an arrangement in which a neutral third party holds funds, documents or assets on behalf of two other parties and releases them only when specified conditions are satisfied. It reduces the trust each side needs to place in the other.

Why it matters

In online commerce, escrow protects both buyer and seller when they do not know each other: the buyer's money is committed but the seller cannot spend it until delivery is confirmed. It is common in real estate, domain-name sales, freelance marketplaces and business acquisitions. Marketplaces often run a lighter version, holding payment for a period before paying out the seller. Whether an escrow provider must be licensed, and how held funds are protected, varies by country.

Example

A buyer agrees to buy a website for 5,000.

  1. The buyer pays 5,000 to the escrow provider.
  2. The provider confirms funds and tells the seller to transfer the site.
  3. The buyer checks the transfer and approves within the agreed inspection period.
  4. The provider releases the money to the seller, minus its fee.

If there is a dispute, the provider follows its terms or a mediator's decision.

Common mistakes

  • Using a fake escrow site. Scammers copy real brands, so verify the service independently.
  • Not defining release conditions and deadlines clearly.
  • Assuming escrow guarantees quality; it only controls when money moves.

Rules vary by country; this entry is a definition only, not legal advice.

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