Definition: A neutral third party that holds funds and documents until all conditions of a real estate transaction are met.
Explanation: Escrow ensures that neither the buyer nor the seller has access to funds or ownership until both sides have fulfilled their contractual obligations. This protects both parties by ensuring that contingencies, such as home inspections and financing approvals, are satisfied before closing. Escrow is also used in mortgage payments to manage property taxes and homeowners insurance.
Example: A buyer deposits their down payment into an escrow account, where it remains until all conditions of the sale are met. Once the lender confirms final loan approval and the title is clear, the escrow company releases funds to complete the transaction.