What is "escrow" in a real estate transaction?

In a real estate transaction, "escrow" refers to a neutral third-party service that holds funds or documents until specific conditions of the transaction are met for completion. This process ensures that both the buyer and seller are protected during a transaction. The escrow agent collects and safeguards the buyer's earnest money, holds the purchase agreement, and manages the closing process, ensuring that all terms are adhered to before the transaction is finalized. This mechanism helps build trust between the parties by ensuring that the funds or pertinent documents are released only when contractual obligations are fulfilled.

Other options do not accurately capture the essence of escrow. For instance, a type of mortgage that requires a large down payment, a real estate financing option for buyers, or a listing service for real estate agents are distinct concepts that do not involve the intermediary role that escrow plays in real estate transactions.