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

In real estate transactions, "escrow" refers to a financial arrangement where a third party holds funds or documents on behalf of the buyer and seller until all agreed-upon conditions of the transaction are fulfilled. This process is designed to protect the interests of both parties involved; neither the buyer nor the seller has direct access to the funds or documents during this period. For example, once a purchase agreement is signed, the buyer may deposit earnest money into an escrow account, which the escrow holder manages until the transaction closes. At that point, all necessary conditions, such as inspections or approvals, must be satisfied, ensuring that both parties have met their commitments before the sale is completed.

This mechanism helps in building trust between parties and provides a structured process for completing the transaction. In contrast, the other options pertain to different aspects of real estate: securing financing is essential but not directly related to the escrow concept, evaluating property value is part of appraisal processes, and closing costs refer to expenses incurred at the finalization of a transaction. Hence, the emphasis on the third-party management of funds as described in the correct answer encapsulates the essence of what escrow means in real estate.