What does "escrow" mean in real estate transactions?

In real estate transactions, "escrow" refers to a process where a neutral third party holds funds and documents on behalf of the buyer and seller until all the conditions of the sale are satisfied. This arrangement provides an added layer of security and assurance for both parties involved in the transaction. The third party, often an escrow agent or a title company, ensures that no funds or documents are released until all agreed-upon terms have been met, such as inspections, financing, or the successful completion of any contingencies specified in the purchase agreement.

This process helps to mitigate risk, as it safeguards the buyer's deposit and protects the seller's interests until the transaction is completed. With escrow in place, both parties can proceed with confidence, knowing that their interests are protected until the deal officially closes.

The other options do not accurately capture the essence of what escrow entails in real estate. For example, delaying the sale of a property or designating a timeframe for inspections do not reflect the secure handling of funds and documents that escrow involves, nor does it concern the legal transfer of ownership directly.