Manufactured Housing Practice Test

What action must an escrow agent take upon receiving notice of a dispute?

1. Disburse funds to the dealer immediately

2. Hold all funds until a release assignment is received

3. Notify the buyer to cancel the sale

4. Return funds to the respective persons

The correct answer is: Hold all funds until a release assignment is received

In situations where an escrow agent receives notice of a dispute, the appropriate action to take is to hold all funds until a release assignment is received. This is important because an escrow agent's role is to act as a neutral third party, ensuring that the funds or assets involved are protected until the parties reach an agreement or a resolution concerning the dispute. By holding the funds, the escrow agent ensures that no party is unfairly disadvantaged while the matter is being resolved. Disbursing funds immediately or returning them without clear instructions could lead to complications or claims of mismanagement, especially when a dispute is in progress. Similarly, notifying the buyer to cancel the sale is not within the purview of the escrow agent's duties, as this action could also exacerbate the dispute rather than facilitate a resolution. Holding the funds in escrow aligns with fiduciary responsibilities and helps maintain trust in the transaction process.