real estate

What is escrow?

Imagine entering into escrow when buying real estate using only a scrap of paper.

  videos Hot for words

 

Marina Orlova of Hot for Words: Hello my dear students! I'm trying to buy a house, and I just entered into escrow! [piles of papers spring up everywhere] I can't believe how much paperwork this is, it's so complicated! Can you imagine how much easier it would be if everything just fit on one scrap of paper?!

The word "Escrow" has Germanic origins, and starts with the word "scrot," which meant "scrap or shred." From there it passed into Old French as "escroue," which meant a "scrap or roll of parchment," and then became the Anglo-French word "escrowe." So what does a scrap of paper or parchment have to do with a buying property? Well, that paper indicated the deed that a third party held until a transaction was completed. And that's still how it's used today…

In the US, the concept of "escrow" is most commonly used in buying real estate. When you get a mortgage for a house or condo, the mortgage company gets an escrow account where you have to deposit money to pay for things like property taxes and insurance.

But in the UK, escrow is often used for smaller person-to-person interactions, like holding money during the sale of a used car, a security deposit for an apartment (or "flat," as the Brits call it), or the cost of a construction project. An escrow company holds the money until the transaction is complete and both parties are happy.

Unfortunately knowing the origin of the word isn't making this process any easier! I'm going to call my agent and see if we can go back to the old way of doing things… I've got some parchment right here!

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