What does ‘escrow’ mean in real estate transactions?

In real estate transactions, 'escrow' refers to an arrangement in which a third party, often an escrow agent or company, holds funds or documents on behalf of the buyer and seller until certain conditions of the agreement are fulfilled. This process provides a safeguard for both parties, ensuring that neither side can access the funds or property documents until all contractual obligations are completed.

For instance, in a home purchase, the buyer will deposit the purchase funds into escrow, and the seller will provide the deed. The escrow agent makes sure that all conditions are met—such as inspections, financing approvals, or necessary paperwork—before releasing the funds to the seller and the documents to the buyer. This protects both parties and creates a level of trust throughout the transaction.

This process is crucial in facilitating secure property exchanges and reducing the risk of fraud or misunderstanding. The other options described different aspects of real estate but do not align with the specific definition of escrow.