What does 'escrow' refer to in real estate transactions?

In real estate transactions, "escrow" refers to a financial arrangement involving a neutral third party that temporarily holds funds and documents until certain conditions of the sale are met. This process ensures that both the buyer and seller are protected during the transaction. The escrow agent manages the transfer of funds, the execution of contracts, and the completion of any required documentation, only releasing the assets when all obligations are satisfied. This helps to build trust between the parties involved, as neither can access the funds or property until mutually agreed terms are fulfilled.

The other choices, while related to real estate, do not accurately describe the concept of escrow. A legal agreement to sell property pertains more to contracts, a type of mortgage contract refers to financing options for purchasing property, and a method of property appraisal deals with determining the value of real estate, none of which directly involves the neutral financial arrangement that defines escrow.