In the context of real estate, what does the term "escrow" refer to?

The term "escrow" refers to a financial arrangement where a neutral third party holds funds or documents on behalf of two parties involved in a transaction until specific conditions are met. In real estate, escrow is commonly used during the buying and selling process to protect both the buyer and the seller. For instance, the buyer places a deposit into an escrow account, which ensures that the seller is assured of having funds available once all terms of the sale are fulfilled.

Utilizing an escrow service helps mitigate risks associated with the transaction, as it ensures all terms of the agreement are satisfied before the funds are released or the property title is transferred. This practice is fundamental in real estate to facilitate secure and transparent transactions, fostering trust among parties involved.