Define "escrow" in the context of real estate transactions.

In real estate transactions, "escrow" refers to a financial arrangement where a neutral third party holds funds or important documents on behalf of the parties involved until certain conditions are met, often specified in a contract. This process is vital in ensuring that both the buyer and seller adhere to the terms of the agreement before any transaction is finalized. The escrow agent safeguards the money and documents, facilitating a secure and smooth transaction by ensuring that neither party can access the funds or documents until all terms—such as inspections, financing, and other contractual obligations—have been satisfied.

This arrangement protects both parties by minimizing the risk involved in the transaction, as it ensures that the seller will get paid and the buyer will receive the property only when everything is completed as per the agreement. The other options presented do not accurately capture the essence of what escrow entails in real estate transactions, making this definition the most accurate and relevant in this context.