What is meant by "escrow" in real estate transactions?

In real estate transactions, "escrow" refers to a process where a neutral third party temporarily holds funds, documents, and instructions related to the transaction until certain conditions are met. This mechanism helps ensure that both the buyer and seller fulfill their obligations before the transaction is completed.

During the escrow period, the escrow agent safeguards the buyer's deposit, manages the necessary paperwork, and makes sure that all conditions agreed upon in the purchase contract are satisfied before finalizing the sale. The funds and documents are only released once everything has been appropriately signed off and all terms have been met, providing a layer of security for both parties involved.

The other options do not accurately describe the escrow process. While contracts being signed is part of the real estate transaction, it does not encompass the broader definition of escrow. Insurance related to real estate transactions refers to title insurance or other forms of protection but does not relate to escrow itself. Finally, while "closing" is a term used for the finalization of a sale, it does not encompass what escrows specifically represent within the timeline of a transaction.