What does the term 'escrow account' refer to in real estate transactions?

The term 'escrow account' in real estate transactions specifically refers to a secure holding account used to hold funds, such as the buyer's earnest money. When a buyer makes an offer on a property, they often provide earnest money as a demonstration of their serious intent to purchase. This money is placed into an escrow account until the transaction is completed. The escrow account ensures that the funds are safeguarded and only released according to the terms agreed upon in the transaction, thus protecting the interests of both the buyer and the seller.

This arrangement is crucial because it instills confidence in both parties: the buyer knows their deposit is secure and the seller knows that a serious commitment has been made. In contrast, the other options refer to different functions related to real estate but do not define the primary usage of an escrow account in the context of transaction security.