What really is an escrow account?
Wiki provides an answer: An escrow account is where money is held by a party but does not belong to the party. Funds in an escrow account should not be commingled with the funds of the person or entity that is holding the funds. In some cases the person holding the funds in an escrow account is a completely independent third party (called an "escrow agent").
In other cases, it is one of the parties to a transaction. There are several reasons for using an escrow account. One main reason is to preserve the funds in the event of a bankruptcy of the person holding the funds. The funds in an escrow account do not belong to the person holding them and should not be able to be used to satisfy that person's own creditors.
When an independent escrow agent is used, the reason is typically to make sure that the funds are only paid out when some specific conditions have been satisfied.
