DRE EXAM CH 5 REVIEW QUESTIONS
WITH CORRECT ANSWERS 2026
1. Which of these persons or entities may not engage in the escrow business?
a) A real estate broker.
b) A domestic or foreign corporation.
c) A principal in the transaction.
d) An attorney. - CORRECT ANSWER -c.
A principal in the transaction cannot perform as an escrow agent in the same transaction as th
ey are not impartial or neutral
Escrow calculates prorations based on days in a year.
a) 300
b) 360
c) 365
d) 370 - CORRECT ANSWER -b. 360
Escrow works on a 30 day month multiplied by 12 months. Thus, for the purpose of calculating
prorations, escrow considers there to be 360 days in a year
Which of the following would most likely result in the termination of a real estate sales escrow
?
a) The mutual agreement of the buyer and the seller.
b) The revocation by the broker for the buyer.
c) The death of the seller.
d) The cancellation of the escrow by the seller. - CORRECT ANSWER -
a. The mutual agreement of the buyer and the seller.
,Escrow can be cancelled by mutual agreement between both principals, not unilaterally by one
party. The broker is not a party to the escrow, therefore, they cannot authorize termination. In
the event of the death of either party, their estate is still responsible for performing
Which of the following will not terminate an escrow?
a) Agreement of the parties.
b) The broker's order to terminate escrow.
c) One of the parties' inability to meet a contingency.
d) The destruction of the property during the escrow - CORRECT ANSWER -
b. The broker's order to terminate escrow.
The broker is not a principal to the escrow and therefore has no authority to cancel it. A mutua
l agreement between the parties or the failure of a contingency to occur will cancel the escrow,
as will the destruction of the property during the escrow
In an escrow statement, the term "recurring costs" is in reference to:
a) title insurance fees.
b) insurance prorations.
c) impound account items.
d) recording fees. - CORRECT ANSWER -c. impound account items.
"Recurring" means costs that will repeat. In this question, only impounds are recurring
An impound account (also called an escrow account, depending on where you live) is simply an
account maintained by the mortgage company to collect insurance and tax payments that are
necessary for you to keep your home, but are not technically part of the mortgage
Escrow closes on the 16th day of February (28 days). The seller receives $500 in rent for the m
onth of February. The seller:
, a) owes the buyer $250.
b) owes the buyer more than $250.
c) owes the buyer less than $250.
d) keeps the entire $500. - CORRECT ANSWER -a. owes the buyer $250.
Remember, escrow calculates a month as 30 days, as stated in Question 2 so disregard the refe
rence to the literal number of days in the month. The 16th day of the month is first day of the
second half of the month and thus the seller owes the buyer precisely half of $500
Which is not true of a tenancy in common?
a) Interests may be unequal.
b) A tenant in common may not will their interest in the property to others on their death.
c) An individual owner can sell their interest without the consent of the other tenants.
d) The owner does not own a specific part of the property. - CORRECT ANSWER -
b. A tenant in common may not will their interest in the property to others on their death.
Answer selections A, C and D are true of a tenancy in common, as distinct from a community i
nterest such as joint tenancy. However, a tenant in common may will their interest in the prope
rty to others on their death
A person holding title to real property in severalty:
a) owns the property with several other owners.
b) has an estate for years.
c) takes title with their spouse.
d) has sole ownership of the property. - CORRECT ANSWER -
d. has sole ownership of the property.
WITH CORRECT ANSWERS 2026
1. Which of these persons or entities may not engage in the escrow business?
a) A real estate broker.
b) A domestic or foreign corporation.
c) A principal in the transaction.
d) An attorney. - CORRECT ANSWER -c.
A principal in the transaction cannot perform as an escrow agent in the same transaction as th
ey are not impartial or neutral
Escrow calculates prorations based on days in a year.
a) 300
b) 360
c) 365
d) 370 - CORRECT ANSWER -b. 360
Escrow works on a 30 day month multiplied by 12 months. Thus, for the purpose of calculating
prorations, escrow considers there to be 360 days in a year
Which of the following would most likely result in the termination of a real estate sales escrow
?
a) The mutual agreement of the buyer and the seller.
b) The revocation by the broker for the buyer.
c) The death of the seller.
d) The cancellation of the escrow by the seller. - CORRECT ANSWER -
a. The mutual agreement of the buyer and the seller.
,Escrow can be cancelled by mutual agreement between both principals, not unilaterally by one
party. The broker is not a party to the escrow, therefore, they cannot authorize termination. In
the event of the death of either party, their estate is still responsible for performing
Which of the following will not terminate an escrow?
a) Agreement of the parties.
b) The broker's order to terminate escrow.
c) One of the parties' inability to meet a contingency.
d) The destruction of the property during the escrow - CORRECT ANSWER -
b. The broker's order to terminate escrow.
The broker is not a principal to the escrow and therefore has no authority to cancel it. A mutua
l agreement between the parties or the failure of a contingency to occur will cancel the escrow,
as will the destruction of the property during the escrow
In an escrow statement, the term "recurring costs" is in reference to:
a) title insurance fees.
b) insurance prorations.
c) impound account items.
d) recording fees. - CORRECT ANSWER -c. impound account items.
"Recurring" means costs that will repeat. In this question, only impounds are recurring
An impound account (also called an escrow account, depending on where you live) is simply an
account maintained by the mortgage company to collect insurance and tax payments that are
necessary for you to keep your home, but are not technically part of the mortgage
Escrow closes on the 16th day of February (28 days). The seller receives $500 in rent for the m
onth of February. The seller:
, a) owes the buyer $250.
b) owes the buyer more than $250.
c) owes the buyer less than $250.
d) keeps the entire $500. - CORRECT ANSWER -a. owes the buyer $250.
Remember, escrow calculates a month as 30 days, as stated in Question 2 so disregard the refe
rence to the literal number of days in the month. The 16th day of the month is first day of the
second half of the month and thus the seller owes the buyer precisely half of $500
Which is not true of a tenancy in common?
a) Interests may be unequal.
b) A tenant in common may not will their interest in the property to others on their death.
c) An individual owner can sell their interest without the consent of the other tenants.
d) The owner does not own a specific part of the property. - CORRECT ANSWER -
b. A tenant in common may not will their interest in the property to others on their death.
Answer selections A, C and D are true of a tenancy in common, as distinct from a community i
nterest such as joint tenancy. However, a tenant in common may will their interest in the prope
rty to others on their death
A person holding title to real property in severalty:
a) owns the property with several other owners.
b) has an estate for years.
c) takes title with their spouse.
d) has sole ownership of the property. - CORRECT ANSWER -
d. has sole ownership of the property.
