Which statement is true regarding the characteristics of escrow?

The correct statement highlights that escrow ensures the security of funds and documents, which is one of the primary purposes of using an escrow service in real estate transactions. When an escrow account is established, it acts as a neutral third party that holds the buyer's deposit and other important documents until all the conditions of the sale are met. This process provides security and peace of mind for both the buyer and seller, as it minimizes the risk of fraud or misappropriation of funds and ensures that all parties fulfill their obligations before the transaction is finalized.

The other statements lack accuracy: while escrow can be cancelled, it typically requires mutual consent and is not arbitrary; escrow is not mandatory for every real estate transaction, as some deals may close without it; and while escrow facilitates the closing process, it does not eliminate the need for a closing altogether, as finalizing a real estate deal still involves legal formalities and document execution.