Manufactured Housing Practice Test

If a buyer fails to secure financing within 30 days, what happens to funds in escrow?

1. They shall be kept by the dealer

2. They shall be returned to the buyer

3. They are forfeited to the third party

4. They are subject to dispute

The correct answer is: They shall be returned to the buyer

When a buyer fails to secure financing within the specified timeframe of 30 days, the correct outcome is that the funds held in escrow shall be returned to the buyer. The purpose of escrow is to protect both the buyer and the seller in a transaction. If the buyer does not obtain financing, it indicates that the sale cannot proceed, and thus, they are entitled to reclaim their funds. This process ensures that the buyer is not penalized for circumstances beyond their control, maintaining fairness in the transaction. In this context, the other choices would not accurately reflect standard practices in real estate transactions. For instance, retaining the funds by the dealer would constitute unfair treatment if the sale does not close due to financing issues. Similarly, forfeiting the funds to a third party would contradict the protective nature of escrow. Lastly, it is not typical for funds to be left in a state of dispute if the buyer cannot secure financing; rather, they should be returned promptly to avoid misunderstandings.