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

The term "escrow" in real estate transactions specifically refers to a neutral third party that holds funds or documents until certain conditions are met, ensuring that both the buyer and seller fulfill their obligations in the agreement. This process is crucial as it adds a layer of security and trust to the transaction, preventing either party from accessing the funds or documents until all agreed-upon terms are satisfied.

In real estate, the escrow agent handles important tasks such as collecting earnest money, preparing closing documents, and disbursing funds after the transaction closes. This helps facilitate a smooth process and provides assurance to both parties that their interests are protected throughout the closing period.

While storage for personal property, legal agreements, or property inspections are important elements of real estate transactions, they do not encompass the function or definition of escrow. Escrow specifically relates to the holding of assets by a neutral party to ensure compliance with the terms of the contractual agreement.