Washington State Real Estate Practice Exam

Question: 1 / 400

Which of the following statements is true regarding escrow?

Escrow is used for final transaction approvals.

Escrow services are always free.

Escrow may include holding of funds and documents.

The statement that escrow may include holding of funds and documents is true because the primary function of escrow is to act as a neutral third party in a real estate transaction. An escrow agent is responsible for managing the funds and important documents until all conditions of the sale are met. This includes holding the buyer's deposit and the seller's signed documents, ensuring that both parties fulfill their obligations before the transaction is finalized. The escrow process protects both the buyer and seller by ensuring that no party is at risk of not performing their contractual duties.

In contrast, final transaction approvals typically occur at the close of escrow, and escrow services often incur fees, so they are not always free. Furthermore, escrow is not limited to cash transactions; it is a crucial part of both cash and financing transactions to ensure a smooth transfer of ownership and funds.

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Escrow is only necessary for cash transactions.

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