What does "escrow" refer to in a real estate transaction?

In a real estate transaction, "escrow" refers to the process where a neutral third party holds funds, documents, or other items until certain conditions are met, usually the completion of the sale. This mechanism is essential as it provides security to both buyers and sellers. The escrow holder acts as an impartial party, ensuring that both sides fulfill their obligations before the transaction is finalized. For example, the buyer may deposit their earnest money into escrow, which assures the seller that the buyer is serious about the purchase. Once all conditions are satisfied, the funds are released to the seller, and the property title is transferred to the buyer, completing the transaction.

The other options do not accurately reflect the meaning of escrow. A legal term for the seller's agent does not involve the neutral holding of funds. The process of home inspection pertains to assessing the property’s condition and is unrelated to the escrow process. Similarly, a type of property appraisal deals with determining value but does not involve the holding of funds or documents in a transaction. Thus, the concept of escrow is best encapsulated by the definition of a neutral third party holding funds during a transaction.