What does the term "escrow" refer to?

The term "escrow" refers to an arrangement where a third party holds funds or documents on behalf of two other parties until specified conditions are met. This is a common practice in real estate transactions, ensuring that both the buyer and the seller fulfill their obligations before any transfer of property or funds occurs. The escrow agent, often an attorney or a title company, acts as a neutral party to safeguard the interests of both involved parties, helping to manage the transaction smoothly and protect them against potential risks.

This process is critical for bridging the time between the agreement and the actual transfer of ownership, providing a secure method for handling funds and important documents like deeds and titles. The other choices do not accurately represent the function or definition of escrow within real estate transactions. For instance, a loan agreement is unrelated to the escrow process, and while pricing strategies and documents about property taxes are important in real estate, they do not pertain to the concept of escrow in this context.