Some states require money collected as a down payment to remain in escrow. True or false?

• A. True, in all states.
• B. True in some states.
• C. False, never required.
• D. False, it must always be in escrow.

Answer: (B)

Key idea: Real estate practice hinges on state-specific rules about how earnest money or a down payment is held. In some states, law requires that money collected as a down payment stay in a neutral escrow account until closing, protecting both buyer and seller from mismanagement or premature use of funds. In other states, the funds can be held in a broker’s trust account or released under certain contingencies, so the escrow requirement doesn’t apply everywhere. Because of these variations, the statement is true in some states, reflecting how practices differ by jurisdiction. When in doubt, check the escrow or real estate statutes for the specific state involved.