What does escrow refer to in real estate?

Escrow in real estate refers to the deposit of funds and documents to a third party, which acts as a neutral intermediary in a transaction. This third party, commonly known as the escrow agent or company, holds the funds and necessary documents (like title deeds and contracts) until all conditions of the sale are met. Once both the buyer and the seller fulfill their respective obligations, the escrow agent releases these funds and documents to the appropriate parties, thus facilitating a smooth and secure transaction.

Using escrow provides several protections for both the buyer and seller, ensuring that neither party has to take undue risk. For instance, the buyer is assured that their money will only be released when they receive properly executed title documents, while the seller can be confident that payment will be received once they have transferred ownership.

The other options, while related to real estate transactions, describe different processes. Inspecting a property is part of due diligence and occurs before a purchase is finalized, while evaluating property titles concerns title searches and lien concerns. Lastly, while legal requirements do exist for transferring ownership, escrow itself is not classified as a legal requirement but rather a method of handling the transaction securely and effectively.