In real estate, what is "escrow"?

In real estate, escrow refers to the involvement of a neutral third party in the transaction who is responsible for holding and managing funds and documents until the terms of the agreement are fulfilled. This process is designed to protect all parties involved by ensuring that the buyer's funds aren't released to the seller, and the seller's title isn't transferred until all conditions of the sale are met.

During the escrow period, the escrow agent or company acts impartially, handling the receipt of the buyer's payment, ensuring that necessary documents, such as deeds and title insurance, are prepared and executed, and confirming that any contingencies, like inspections or financing, are satisfied before finalizing the transaction. This role is crucial because it adds a layer of security and trust—both for the buyer and seller—ensuring that neither party is at risk of losing their interests before the deal is closed.

This clarity on the neutral third-party role in escrow contrasts with other options that do not accurately describe the escrow process, such as insurance types, property descriptions, or negotiating processes, which are distinctly different components of a real estate transaction.