In real estate transactions, what does the term "escrow" commonly refer to?

The term "escrow" commonly refers to the arrangement in which a third party holds funds or documents on behalf of the buyer and seller during a real estate transaction. This process is crucial because it helps ensure that the conditions of the sale are met before the transaction is finalized. For example, the buyer might deposit earnest money into escrow to show commitment, and the seller provides the property deed. The escrow agent will release these assets only when all contractual obligations are satisfied, helping to protect both parties' interests and providing a secure method for handling the exchange of money and property.

The other options pertain to different aspects of real estate transactions. A mortgage agreement is a loan document establishing the terms under which a borrower must repay funds borrowed to purchase property. A legal description of property provides a precise way to identify and describe the boundaries of the property being bought or sold. A type of insurance policy, such as title insurance, protects against losses due to defects in the title. However, these elements do not capture the essence of escrow, which centers on the intermediary handling of assets until the completion of a transaction.