An escrow account in a real estate transaction is used to:
Why Hold funds (such as earnest money or taxes and insurance reserves) by a neutral third party until certain conditions are met Is Correct
Answer B: Hold funds (such as earnest money or taxes and insurance reserves) by a neutral third party until certain conditions are met
Exam Tip: Escrow & Title
Escrow questions test the neutral third-party role and the sequence of closing events. Remember that the escrow agent acts as a dual agent for both buyer and seller and cannot advocate for either side.
Key Escrow & Title Terms in This Question
A deposit made by the buyer when submitting a purchase offer, demonstrating serious intent and serving as consideration for the contract.
EscrowA neutral third-party arrangement where funds, documents, and instructions are held until all conditions of a real estate transaction are satisfied.
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Key Terms to Know
A neutral third-party arrangement where funds, documents, and instructions are held until all conditions of a real estate transaction are satisfied.
Earnest MoneyA deposit made by the buyer when submitting a purchase offer, demonstrating serious intent and serving as consideration for the contract.
Private Mortgage Insurance (PMI)Insurance required by lenders on conventional loans with less than 20% down payment, protecting the lender — not the borrower — against default.
Deed of TrustA security instrument used in many states instead of a mortgage, involving three parties: borrower (trustor), lender (beneficiary), and a neutral trustee.
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