Casa Academy

Reviewed by Casa Academy and updated July 29, 2026 using the current DBPR checklist and Pearson VUE scheduling guidance.

Escrow

Escrow is a neutral third-party arrangement where funds, documents, or instruments are held until contractual conditions are satisfied, most commonly earnest money and closing proceeds until the buyer receives clear title and the seller receives net funds.

Exam context

Identify escrow as conditional holding by a neutral party. Commingling mixes client funds with personal funds and violates license law even when an agent calls the account escrow colloquially.

Transaction escrow

Buyers deposit earnest money into an escrow account subject to contract contingencies. At closing the escrow agent reconciles payoffs, prorations, and commissions before disbursing. Failed transactions follow contract terms for who receives earnest money after mutual release or dispute resolution.

Mortgage impound accounts

Lenders may escrow property taxes and insurance premiums with monthly payments, paying bills when due. This protects the lender's collateral. License exams separate neutral closing escrow from borrower escrow accounts managed by loan servicers.

Examples

  • Earnest money deposit

    A buyer wires $10,000 earnest money to a title company escrow account. After inspection approval and clear title, the deposit applies to down payment at closing.

  • Tax and insurance impounds

    A homeowner pays $2,400 yearly into the lender's escrow impound; the servicer pays county taxes and hazard insurance from that balance.

Keep studying

Practice escrow questionsEnroll in pre-licensing

Related terms

  • ComminglingIllegal mixing of client trust funds with personal accounts.
  • Executed contractsSigned agreements that trigger escrow instructions and closing steps.

Related resources

Sources