In a real estate transaction, what does the term "escrow" refer to?

In a real estate transaction, "escrow" specifically refers to a third party who holds funds or documents until certain conditions are met. This neutral third party acts to ensure that both the buyer and seller fulfill their contractual obligations before the transaction is finalized. For example, the buyer may deposit funds into escrow, and the seller will provide the title or deed to the escrow agent. The escrow agent then releases these items only when all terms of the agreement are satisfied, providing security and assurance to both parties during the transaction process.

The other options, while related to aspects of real estate transactions, do not accurately define "escrow." A legal document signed by both parties pertains to the agreements or contracts in the transaction, but it is not the concept of escrow itself. An insurance policy for the property is a separate contract that protects against specific risks but does not encompass the escrow process. A fee payable to the agent deals with the compensation for real estate services rendered and is also outside the core definition of escrow, which focuses more on the process of safeguarding funds and documents during the transaction.