Ace the Alabama Real Estate Challenge 2025 – Unlock Your 60-Hour Mastery!

Question: 1 / 400

What does the term “escrow” refer to in real estate transactions?

A legal document transferring property ownership

A financial arrangement involving a third party holding funds

The term "escrow" in real estate transactions primarily refers to a financial arrangement in which a neutral third party holds funds or documents on behalf of the buyer and seller until certain conditions of the transaction are met. This arrangement ensures that both parties can trust that the necessary actions will be completed before money or property changes hands. The escrow process helps protect the interests of both the buyer and the seller by providing a secure environment for the management of the transaction until it is finalized.

This definition aligns precisely with option B, as it pertains directly to the involvement of a third party in managing the financial aspects of the real estate deal. This control can include holding deposits, earnest money, and ensuring that all contractual obligations are fulfilled before the closing process is completed.

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A contract between a buyer and a seller

A type of mortgage agreement

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