National Real Estate Exam (PSI)Transfer of TitleMedium
In a 'closing in escrow' arrangement (common in escrow states), what is the primary role of the neutral escrow agent?
- ATo provide legal representation exclusively for the buyer
- BTo hold documents and funds and disburse them once all closing conditions are satisfied
- CTo approve or deny the buyer's mortgage application
- DTo negotiate final sale price between buyer and seller
Show answer & explanationAnswer & explanation
Correct answer: B. To hold documents and funds and disburse them once all closing conditions are satisfied
In an escrow closing, a neutral third party (the escrow agent) holds the deed, funds, and other documents in trust, and disburses/records them once all contractual conditions have been met by both parties—without either party's representative acting for both sides at a single table.
Why the other options are wrong
- A. The escrow agent is neutral and does not represent either party legally.
- C. Loan approval is handled by the lender's underwriting department, not escrow.
- D. Price negotiation happens earlier in the contract process, not through the escrow agent.
Escrow Closing
A closing method where a neutral third party holds funds and documents, releasing them only when all conditions of the contract have been satisfied.
- Common in western/escrow states as an alternative to 'table closings'
- Escrow agent is neutral, not representing buyer or seller
- Agent disburses funds and records deed once conditions are met
Memory trick: Escrow = a neutral referee holding the ball until both teams are ready.