Housing and Community Development (HCD) Practice Exam

What can escrow instructions provide for?

1. Proration of local property tax due

2. Payment of any registration fees

3. Both A and B

4. None of the above

The correct answer is: Both A and B

Escrow instructions are critical guidelines that direct how the escrow agent should manage the transaction between the buyer and seller. These instructions can cover various financial arrangements and responsibilities that must be addressed during the closing process of real estate transactions. The proration of local property tax due is a common element in escrow instructions. This occurs because property taxes may not align perfectly with the timing of ownership transfer. The escrow agent will calculate the tax amounts owed for the period before and after the transaction, ensuring that the seller pays their share for the time the property was owned prior to the sale. Additionally, the payment of any registration fees is another aspect that can be dealt with in escrow instructions. These fees may include costs associated with recording the property transfer and other relevant fees necessary to finalize the title or ownership transfer. Thus, escrow instructions can effectively address both the proration of local property taxes and the payment of registration fees, making the answer that they can provide for both of these elements entirely accurate. This comprehensive understanding of what escrow instructions encompass is essential for managing real estate transactions efficiently.