California Real Estate Practice Exam

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Master the California Real Estate Exam with our comprehensive practice quiz. Get expert tips, detailed content review, and insider strategies to pass on your first try.

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What type of relationship does an escrow agent have with the principals?

Full agency
No agency
Limited agency
Dual agency

The correct answer is: Limited agency

An escrow agent does not have full agency with the principals because they do not have the authority to act on behalf of either party. They act as a neutral third party to facilitate the transaction and hold funds until the terms of the agreement are fulfilled. Option A, full agency, is incorrect because, as mentioned, the escrow agent does not have the authority to act on behalf of either party. This means they do not have the power to make decisions or take actions on behalf of the principals. Option B, no agency, is also incorrect because although the escrow agent is not a representative of either party, they still have a limited agency relationship with both parties. This is because they have a legal duty to both parties to carry out the terms of the escrow agreement. Option D, dual agency, is incorrect because in a dual agency relationship, an individual or entity represents both parties in a transaction. This is not the case with an escrow agent as they do not represent either party, but rather act as a neutral intermediary. In summary, an escrow agent has a limited agency relationship with the principals as they act as a neutral third party and do not have the authority to act on behalf of either party.