Ace the Texas Law Module 2026 – Smash the 20-Hour Power Test!

Question: 1 / 400

What is the purpose of an escrow account?

To hold funds for future use in property maintenance

To manage closing costs in real estate transactions

An escrow account serves a critical function in real estate transactions by managing the closing costs associated with the purchase or sale of property. This type of account is often established to hold funds temporarily until specific conditions outlined in a contract are met, at which point the funds are released to the appropriate party.

In the context of real estate, an escrow account ensures that all parties involved—the buyer, seller, and any real estate professionals—are protected during the transaction process. The funds held in the escrow account may include earnest money, down payments, and other fees related to the closing process. By utilizing an escrow account, the transaction can proceed smoothly and with a level of assurance that all parties have fulfilled their contractual obligations, making it a reliable mechanism for handling the financial aspects of real estate dealings.

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To serve as a security deposit for tenants

To provide financing options for real estate agents

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