Escrow in real estate involves a neutral third party holding money and property until sale conditions are met. An escrow account manages a borrower's monthly mortgage payments for taxes and insurance, ensuring timely payments and reducing lender risk. Escrow fees typically range from 1% to 2% of the sale price and are negotiable. Earnest money, 1%-3% of the sale price, shows buyer commitment and is applied to the down payment. Escrow simplifies transactions by handling payments to involved parties.