PSI Virginia Real Estate Practice Exam

What does appropriation in the context of escrow accounts refer to?

1. The proper handling of funds

2. The investment of escrow funds

3. Stealing of escrow money or property

4. The transfer of funds between accounts

The correct answer is: Stealing of escrow money or property

In the context of escrow accounts, appropriation specifically refers to the improper taking or misapplication of funds held in escrow, which can be characterized as stealing or misappropriation. Escrow accounts are established to hold and manage funds that are intended for specific purposes in a real estate transaction, ensuring that the money is protected until all contractual obligations are met. When someone appropriates escrow funds, they engage in actions that violate the intended purpose of those funds, such as diverting the money for personal use or misusing it in a way that is not in accordance with the escrow agreement. This activity is a serious breach of trust and legality, reflecting a failure to handle funds as required by law and ethical standards. The other options, while related to the management of escrow accounts, do not capture the definition of appropriation. Proper handling of funds refers to the correct management processes, the investment of escrow funds pertains to how those funds might be grown while held in escrow, and transferring funds between accounts involves movement without the implication of wrongdoing. Therefore, the correct answer accurately defines the concept of appropriation in this context.