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

The term "escrow" refers to the involvement of a neutral third party that holds funds or documents on behalf of the buyer and seller during a real estate transaction. This process ensures that both parties meet their contractual obligations before the transaction is finalized. The escrow agent is responsible for managing the funds and documents, ensuring that everything is in order for the closing of the sale.

This method adds an additional layer of security and peace of mind for both parties, as it reduces the direct exchanges of money and documents until all conditions of the transaction are satisfied. This way, the buyer can be sure that the funds are secure until they receive the property, while the seller can be assured that the buyer has the necessary funds ready for the purchase.

In contrast, the other options do not accurately describe escrow. Financing options pertain to how buyers can fund their purchases, selling strategies relate to methods agents use to market properties, and property inspections serve to assess the condition of a property rather than facilitate the transaction itself.