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

The term 'escrow' in real estate specifically refers to a third-party service that holds funds or documents on behalf of the parties involved in a transaction until specific conditions of a contract are fulfilled. This process ensures that both the buyer and seller meet their obligations before any exchange of funds occurs. For example, in a typical property sale, the buyer may deposit earnest money into escrow, which is only released to the seller once all contractual requirements are satisfied, such as completing inspections or obtaining financing. This mechanism protects both parties and adds a layer of security to real estate transactions.

The other options do not accurately capture the definition of escrow. While there are various ownership structures like joint tenancy or tenancy in common, those do not involve the holding of funds or documents. A tax related to property sales, such as transfer tax, is unrelated to the escrow process. Similarly, while legal documents, like a deed, are essential in property transactions, they do not represent the escrow concept, which is fundamentally about managing funds or documents through a neutral party until contractual obligations are met.