What does "escrow" refer to in real estate transactions?

Escrow in real estate transactions specifically refers to funds or assets that are held by a neutral third party until certain predefined conditions are met. This arrangement is designed to protect both the buyer and the seller; the funds are not released to the seller until the buyer's requirements, such as satisfactory inspection results or title transfer, are fulfilled. This setup ensures that both parties fulfill their obligations before any money changes hands, reducing the risk involved in the transaction.

In contrast, a contract with a specified termination date pertains to the timeline of an agreement, not the safekeeping of funds or assets. The process of transferring property ownership is known as closing or settlement, separate from the escrow process. Finally, the legal evaluation of a property’s worth is typically handled through an appraisal, which does not involve escrow services. Thus, the definition that reflects the true nature of escrow in real estate is indeed the one that discusses the holding of funds by a third party until specific conditions are met.