Housing and Community Development (HCD) Practice Exam

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What must happen when an escrow account is opened?

Notify only the buyer
Notify the California Department of Housing
Notify the escrow agent
None of the above

The correct answer is: Notify the California Department of Housing

When an escrow account is opened, it is essential to notify the appropriate regulatory body, which in many cases can include state agencies overseeing housing and real estate practices, such as the California Department of Housing. This notification is part of ensuring that the transaction adheres to state laws and regulations designed to protect all parties involved in the real estate deal. In this context, the escrow process is designed to provide an impartial third-party service that holds funds or documents until the conditions of the real estate transaction are met. Notifying the appropriate department helps maintain transparency, ensuring that the transaction is being conducted legally and ethically. The other options, such as notifying only the buyer or notifying the escrow agent, do not address the regulatory compliance aspect that is critical in real estate transactions. While it may be important for the buyer to be informed or for the escrow agent to be aware of the transaction details, these actions do not fulfill the obligation to keep regulatory bodies informed about the opening of an escrow account.