Escrow is the "third party place of common custody or trust" where all parties related to a transaction place their documents and funds until the transaction has been finalized. Escrow is common for any transaction where there are multiple stages and where one stage is dependent on the next. To ensure that all parties "live up to their end of the deal" the money and documents are placed in escrow until the transaction is finalized. Real estate is a common place for escrow to be used as the seller is reluctant to transfer ownership without payment and the buyer payment without ownership.
An escrow agent is the person who acts as the third party and gathers all documents, money, and signatures. When all is complete, the escrow agent disburses the money to the seller and the title and deed to the buyer and/or the lending bank. The escrow agent will file the appropriate documents with their corresponding government agency as well. The escrow agent acts according to the contract agreed upon by the two parties and within established law. If conflicts arise during the course of execution, the escrow agent will not proceed until the conflict is resolved.