What is the definition of "escrow" in real estate transactions?

The definition of "escrow" in real estate transactions accurately describes a third-party service that holds funds and documents until closing conditions are met. This process is crucial in ensuring that all terms of the transaction are fulfilled before the transfer of ownership takes place. The escrow agent or service acts as a neutral intermediary, safeguarding both the buyer’s and the seller’s interests.

In practical terms, this means that the buyer deposits earnest money and other necessary documents with the escrow agent, and the seller provides the title and other required paperwork. The closing process is only completed when all agreed-upon conditions are satisfied, at which point the escrow agent facilitates the transfer of funds to the seller and the title to the buyer. Utilizing escrow is an essential risk management practice in real estate, providing assurance that funds and documents are managed properly throughout the transaction process.