In a real estate transaction, what does "escrow" mean?

In a real estate transaction, "escrow" refers to a financial arrangement involving a third party who temporarily holds funds and documents until certain conditions of the transaction are fulfilled. This arrangement offers protection to all parties involved—the buyer, the seller, and often the lender—by ensuring that neither party can access the funds or documents until the terms of the agreement are met.

The escrow process helps to facilitate the transfer of ownership and ensure that all necessary steps, such as inspections and financing, are completed before the transaction is finalized. Once all conditions are satisfied, the escrow agent releases the funds to the seller and the title documents to the buyer, completing the transaction securely.

This definition distinguishes escrow from other options; for example, it is not a method for appraising property values, a marketing technique, or a closing process itself, but rather a secure holding arrangement that aids in those processes.