In real estate, what does the term 'escrow' refer to?

The term 'escrow' refers primarily to a third-party account where funds are held until certain agreed-upon conditions are met in a real estate transaction. This process ensures that both parties—the buyer and the seller—fulfill their obligations before the transaction is fully completed. For instance, during a real estate purchase, the buyer may deposit the purchase price into an escrow account that will only be released to the seller once all conditions of the sale, like inspections and financing, are satisfactorily met. This mechanism protects both the buyer and the seller, as it helps ensure that the seller will receive payment only after fulfilling their part of the agreement, and the buyer is safeguarded against potential issues that might arise before closing.

In contrast, the other options pertain to different aspects of real estate transactions that do not accurately define escrow. For example, the transfer of title ownership is related to the closing process, not specifically to escrow. A type of mortgage with no down payment does not connect with the escrow concept, as it is a financing method, and settling disputes involves legal processes that fall outside of the escrow framework. Thus, the correct understanding of escrow focuses on the secure holding and conditional release of funds facilitated by a neutral third party.