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

In real estate transactions, escrow refers to a neutral third party that holds funds or documents on behalf of the buyer and seller until certain conditions are met for the transaction to be completed. This process ensures that both parties fulfill their obligations, providing security and trust in the transaction. For instance, the buyer deposits earnest money into escrow, which will only be released to the seller upon successful closing of the sale, or returned to the buyer if the transaction does not go forward under agreed circumstances. This arrangement helps protect the interests of both parties during the often complex process of real estate transactions.

Other options present different concepts that do not accurately define escrow. While some may involve aspects of real estate transactions, they do not capture the essential role that an escrow serves in maintaining neutrality and security between the involved parties.