What is the primary role of an escrow agreement in a real estate transaction?

The primary role of an escrow agreement in a real estate transaction is to hold funds until certain conditions are met. This arrangement serves as a neutral third-party mechanism that ensures all parties involved in the transaction meet their obligations before the funds are released. For example, the buyer's deposit or down payment is held in escrow until the necessary conditions, such as satisfactory completion of inspections or fulfillment of contractual agreements, are confirmed. Only after these conditions are satisfied does the escrow agent release the funds to the seller, thereby providing security to both buyer and seller. This way, the escrow agreement plays a critical role in protecting all parties and promoting trust throughout the closing process.