What does "escrow" refer to in real estate transactions?

In real estate transactions, "escrow" refers specifically to the role of a neutral third party who holds funds and documents related to the transaction until certain conditions are fulfilled. This process is essential for ensuring security and compliance for both the buyer and seller. For instance, an escrow agent manages the exchange of money and property, making certain that all contractual obligations are met before the transfer of ownership occurs.

The purpose of escrow is to protect the interests of all parties involved; funds are held securely, and the transaction can only proceed when both the seller has met their obligations, such as providing a clear title to the property, and the buyer has fulfilled their requirements, such as securing financing. This helps to prevent fraud and ensures that neither party is at risk of losing money or the property itself during the process.

In contrast, the other options imply different concepts that are not related to this definition of escrow. Thus, the clarity and security provided by the escrow process make it a cornerstone of real estate transactions.