Which of the following is true about escrow in real estate?

Escrow is an essential concept in real estate transactions where a neutral third party temporarily holds funds or documents until specific conditions are met, usually leading to the completion of a transaction. This process ensures that both parties fulfill their contractual obligations before the exchange of assets—like property or money—occurs. By holding onto the funds or important documents, such as the deed to the property, the escrow agent safeguards the interests of both the buyer and the seller.

In contrast, the other statements do not accurately describe escrow. The idea that it is a type of home loan misrepresents the role of escrow, as it is not involved in financing but rather in the management of funds and documentation. Additionally, escrow is not an agreement to sell property at a future date; instead, it is a mechanism to ensure the secure and orderly completion of transactions. Finally, the notion that escrow is only applicable in commercial real estate is incorrect, as it is commonly used in residential real estate transactions as well. Overall, escrow serves a critical function in ensuring transparency and security during the transfer of property.