What does the term "escrow" refer to?

The term "escrow" pertains to a financial arrangement where a third party holds funds or documents on behalf of two other parties involved in a transaction. This arrangement is often used in real estate transactions to ensure that the buyer's funds are held securely until all the necessary conditions of the sale are fulfilled, such as completing inspections or obtaining financing. Once all conditions are met, the escrow agent releases the funds to the seller and the title to the buyer. This process provides protection for all parties involved, as it helps to ensure that the transaction proceeds smoothly and fairly. The clarity and security provided by escrow are essential in real estate transactions, where significant amounts of money and important documents are exchanged.