Manufactured Housing Practice Test

In which situation should a mobile home dealer avoid establishing an escrow account?

1. A) If the dealer has less than 10% ownership interest

2. B) If the dealer has more than 5% ownership interest

3. C) If the dealer has no ownership interest

4. D) If the escrow company offers a lower rate

The correct answer is: B) If the dealer has more than 5% ownership interest

The situation where a mobile home dealer should avoid establishing an escrow account is when the dealer has more than 5% ownership interest. This is due to the potential for conflicts of interest that can arise if the dealer has a significant financial stake in the transaction. When a dealer has a high ownership interest, they may be viewed as having undue influence over the escrow process, which is designed to be impartial and protect both the buyer and seller's interests. In cases where the dealer has a lesser ownership interest or no ownership interest at all, the risks associated with conflicts of interest are significantly reduced, making it more appropriate for them to engage in an escrow arrangement. Escrow accounts are meant to ensure that funds and documents are handled fairly during a real estate transaction, and excessive ownership interests can undermine the integrity of this process. Therefore, maintaining an impartial escrow service is crucial when a dealer's ownership interest is low or non-existent.