What is a real estate "escrow"?

The concept of "escrow" in real estate refers to a process where a neutral third party holds assets, typically funds or documents, on behalf of the buyer and seller during a transaction until certain specified conditions are met. This arrangement helps ensure that both parties fulfill their obligations before the transaction is completed. For example, the buyer may need to secure financing or the seller might need to complete certain repairs, and the escrow process protects both parties by managing these requirements.

This option accurately captures the essence of what escrow entails in real estate practice. It is crucial in managing trust between the parties involved and providing security for both the buyer and the seller, helping to facilitate a smooth transaction. The other choices presented do not define escrow correctly; they refer to related but distinct concepts in real estate transactions.