Texas Real Estate State Practice Exam

The term "escrow" refers to a neutral account that holds funds during real estate transactions until all contractual obligations are met. In the context of a real estate deal, escrow serves as a safeguard for both the buyer and the seller. When a buyer makes an offer and it is accepted, typically an earnest money deposit is placed into an escrow account managed by a third party, such as an escrow company or a real estate attorney. This ensures that the funds are secure and that the seller can trust that the buyer is committed to proceeding with the purchase.

Once the transaction progresses, various conditions, such as inspections and financing approvals, must be satisfied before the transaction can close. The buyer’s funds and the seller’s deed are both held in escrow until these conditions are met. Upon successful completion of all terms, the escrow officer will disburse the funds to the seller and transfer the property title to the buyer. This process helps mitigate risks for both parties and is an essential part of ensuring a smooth real estate closing process.