What does "escrow" mean in real estate?

In real estate, "escrow" refers to a neutral third-party account set up to hold funds and documents during a transaction until all the conditions of the sale are met. This process ensures that both the buyer and seller can trust that their interests are being protected; the funds are not released until the buyer receives the property and the seller receives payment. Escrow accounts can hold not just the purchase money, but also other important documents such as the title deed and any contingent agreements related to the sale.

Escrow is crucial in real estate transactions as it facilitates a safe and secure transfer of funds and protects both parties from potential loss or fraud. For instance, if the buyer secures financing or if any contingencies arise, the escrow process ensures everything is handled appropriately before the transaction is finalized. This creates a reliable environment for both parties to complete their contractual obligations without the immediate risk of losing money or property.