38-WA-03 Washington Escrow Exam
Questions And Correct Answers
(Verified Answers) Plus Rationales 2026
Q&A | Instant Download Pdf
1. What is the primary purpose of an escrow in real estate
transactions?
A. To transfer property titles
B. To hold funds and documents until conditions are met
C. To appraise property value
D. To provide mortgage loans
B. To hold funds and documents until conditions are met
Rationale: Escrow serves as a neutral intermediary that holds funds,
documents, and instructions until all conditions of a transaction are
satisfied, ensuring both parties fulfill their obligations before closing.
2. Which party typically selects the escrow agent in a real estate
transaction?
, A. The lender
B. The buyer and seller jointly
C. The real estate agent
D. The county recorder
B. The buyer and seller jointly
Rationale: The escrow agent is usually chosen by mutual agreement
between the buyer and seller to ensure neutrality in managing the
transaction.
3. Which of the following is NOT typically handled by an escrow
agent?
A. Disbursing funds
B. Recording deeds
C. Drafting purchase agreements
D. Collecting signatures
C. Drafting purchase agreements
Rationale: Escrow agents do not prepare contracts; their role is to
follow instructions, manage funds, and coordinate the completion of
conditions outlined in agreements.
4. What is an “impound account” in escrow?
A. An account for legal disputes
B. A reserve for taxes and insurance
, C. A personal savings account for buyers
D. A trust account for investment purposes
B. A reserve for taxes and insurance
Rationale: Lenders often require escrow (impound) accounts to collect
funds for property taxes and insurance premiums, ensuring timely
payments.
5. Who is ultimately responsible for ensuring the escrow instructions
are followed?
A. The escrow officer
B. The lender
C. The buyer
D. The seller
A. The escrow officer
Rationale: The escrow officer must ensure that all terms and
conditions outlined in the escrow instructions are accurately
completed before closing.
6. When can escrow funds be legally disbursed?
A. After verbal confirmation from both parties
B. Only after all conditions in the escrow instructions are met
C. When the buyer requests them
D. Immediately after signing the purchase agreement
, B. Only after all conditions in the escrow instructions are met
Rationale: Escrow funds are held in trust and can only be released
according to the explicit instructions and fulfillment of all conditions.
7. Which document typically authorizes an escrow agent to act?
A. Purchase agreement
B. Escrow instructions
C. Title report
D. Closing disclosure
B. Escrow instructions
Rationale: Escrow instructions serve as a written directive outlining
the responsibilities and authority of the escrow agent in the
transaction.
8. How does an escrow agent remain neutral in a transaction?
A. By representing the seller only
B. By representing the buyer only
C. By holding funds and documents without favoring either party
D. By providing legal advice
C. By holding funds and documents without favoring either party
Rationale: Neutrality ensures that the escrow agent acts impartially,
only executing instructions agreed upon by both parties.
Questions And Correct Answers
(Verified Answers) Plus Rationales 2026
Q&A | Instant Download Pdf
1. What is the primary purpose of an escrow in real estate
transactions?
A. To transfer property titles
B. To hold funds and documents until conditions are met
C. To appraise property value
D. To provide mortgage loans
B. To hold funds and documents until conditions are met
Rationale: Escrow serves as a neutral intermediary that holds funds,
documents, and instructions until all conditions of a transaction are
satisfied, ensuring both parties fulfill their obligations before closing.
2. Which party typically selects the escrow agent in a real estate
transaction?
, A. The lender
B. The buyer and seller jointly
C. The real estate agent
D. The county recorder
B. The buyer and seller jointly
Rationale: The escrow agent is usually chosen by mutual agreement
between the buyer and seller to ensure neutrality in managing the
transaction.
3. Which of the following is NOT typically handled by an escrow
agent?
A. Disbursing funds
B. Recording deeds
C. Drafting purchase agreements
D. Collecting signatures
C. Drafting purchase agreements
Rationale: Escrow agents do not prepare contracts; their role is to
follow instructions, manage funds, and coordinate the completion of
conditions outlined in agreements.
4. What is an “impound account” in escrow?
A. An account for legal disputes
B. A reserve for taxes and insurance
, C. A personal savings account for buyers
D. A trust account for investment purposes
B. A reserve for taxes and insurance
Rationale: Lenders often require escrow (impound) accounts to collect
funds for property taxes and insurance premiums, ensuring timely
payments.
5. Who is ultimately responsible for ensuring the escrow instructions
are followed?
A. The escrow officer
B. The lender
C. The buyer
D. The seller
A. The escrow officer
Rationale: The escrow officer must ensure that all terms and
conditions outlined in the escrow instructions are accurately
completed before closing.
6. When can escrow funds be legally disbursed?
A. After verbal confirmation from both parties
B. Only after all conditions in the escrow instructions are met
C. When the buyer requests them
D. Immediately after signing the purchase agreement
, B. Only after all conditions in the escrow instructions are met
Rationale: Escrow funds are held in trust and can only be released
according to the explicit instructions and fulfillment of all conditions.
7. Which document typically authorizes an escrow agent to act?
A. Purchase agreement
B. Escrow instructions
C. Title report
D. Closing disclosure
B. Escrow instructions
Rationale: Escrow instructions serve as a written directive outlining
the responsibilities and authority of the escrow agent in the
transaction.
8. How does an escrow agent remain neutral in a transaction?
A. By representing the seller only
B. By representing the buyer only
C. By holding funds and documents without favoring either party
D. By providing legal advice
C. By holding funds and documents without favoring either party
Rationale: Neutrality ensures that the escrow agent acts impartially,
only executing instructions agreed upon by both parties.
