An escrow account is a financial arrangement where a third party holds funds or assets on behalf of two other parties involved in a transaction. This account ensures that the money is safely kept until specific conditions are met, such as the completion of a sale or the fulfillment of a contract. It is commonly used in real estate transactions, where the buyer's deposit is held in escrow until the deal is finalized. The use of an escrow account provides security for both the buyer and the seller. The buyer can be assured that their money will only be released when the agreed-upon terms are satisfied, while the seller can be confident that the buyer has the necessary funds. This process helps to prevent fraud and ensures a smoother transaction between the parties involved.