A neutral third-party arrangement holding funds or documents until all conditions of a transaction are met.
Why Escrow matters on the exam
This term belongs to Transfer of Title. The questions below are real items from Freehold's bank that use it - each one cites its source.
Exam questions using Escrow
Every Freehold question shows why the right answer is right — and cites its source.
After a purchase contract is signed, the earnest money received by the brokerage must be:
Deposited into the trust account within the deadline set by state law
Held in the office safe until the closing
Deposited directly into the broker's own separate personal operating account
Given directly over to the seller immediately upon its receipt by the firm
Show answer & explanation
Deposited into the trust account within the deadline set by state law — State license laws require earnest money to be deposited into the broker's trust or escrow account promptly, within a statutory deadline that varies by state. Holding or misdepositing funds violates license law.
Source: PSI National Real Estate Exam Content Outline — Broker Supplement
When a broker opens a new trust or escrow account, the broker is generally required to:
Keep the newly opened account entirely and permanently confidential from the state real estate commission
Notify the state real estate commission of the account, including the depository and account information
Notify the brokerage's retained attorney and its bonding company, who then keep the records
Wait until the account's first regulatory audit before disclosing its existence at all to the state real estate commission
Show answer & explanation
Notify the state real estate commission of the account, including the depository and account information — Most license laws require brokers to notify the real estate commission of each trust account they maintain so regulators can verify and, if needed, examine the account.
Source: PSI National Real Estate Exam Content Outline — Broker Supplement
A trust account maintained by a brokerage must be titled in a way that:
Uses only the bank's internal account number with no broker identification
Matches the exact legal name of the brokerage's largest client
Clearly identifies it as a trust or escrow account separate from the broker's personal or operating funds
Remains identical in title to the broker's personal checking account
Show answer & explanation
Clearly identifies it as a trust or escrow account separate from the broker's personal or operating funds — Clear titling, such as 'Broker Name, Trust Account,' puts the bank and regulators on notice that the funds belong to clients and are not the broker's personal assets.
Source: PSI National Real Estate Exam Content Outline — Broker Supplement
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