What is the function of escrow in real estate?

The function of escrow in real estate transactions is to hold funds and documents until the transaction is completed. Escrow involves a neutral third party that manages the transfer of money and documents between the buyer and seller. This ensures that all terms of the purchase agreement are fulfilled before the final transfer of property ownership takes place.

While the buyer and seller may have mutual agreements, escrow offers a secure method to mitigate risks involved in the transaction. The funds for the purchase, such as the buyer's deposit and other payments, are held in escrow; likewise, essential documents like the title deed and any relevant disclosures are also safeguarded until all contingencies related to the transaction are resolved.

The other choices do not accurately reflect the escrow's primary role—finalizing the purchase agreement is done through negotiations and mutual acceptance, serving as a marketing tool involves promoting the property rather than managing funds, and providing home insurance options is typically handled separately from the escrow process. Thus, the correct answer clearly illustrates the fundamental purpose of escrow in real estate transactions.