Illinois Real Estate Practice Exam

At the closing for the sale of a home, the lender requires the buyer to place a sum of money into an impound or escrow account. The purpose of this money is most likely for:

1. Payment of real estate agent fees

2. Repairing potential property defects

3. Payment of future real estate taxes or property insurance

4. Reserving funds for the homeowner association

The correct answer is: Payment of future real estate taxes or property insurance

The correct answer is indeed the requirement for the buyer to place a sum of money into an impound or escrow account to cover the payment of future real estate taxes or property insurance. This is a common practice in real estate transactions where lenders want to ensure that property-related expenses are paid on time. The lender collects these funds upfront and holds them in escrow, allowing them to manage disbursements for property taxes and insurance premiums directly when they come due. This helps protect both the lender's investment and the homeowner's property from potential liens due to unpaid taxes or lapses in insurance coverage. Other options, while they may involve financial aspects of homeownership, do not typically require the establishment of a mandatory escrow account by the lender. Real estate agent fees are paid through different mechanisms during the closing process. Repairing potential defects would generally be the responsibility of the homeowner or handled through negotiated agreements prior to closing, not through an escrow account specifically set aside for that purpose. Lastly, reserving funds for a homeowner association, although important, is not generally a requirement by lenders for the payment of escrow accounts associated with taxes or insurance.