Manufactured Housing Practice Test

When must an escrow account be opened by the dealer?

1. Upon receipt of cash only toward the purchase of new or used units

2. Upon mutual endorsement of purchase documents when cash or equivalents are received

3. Upon receipt of cash for the purchase of a resale unit

4. Prior to delivery of a new unit

The correct answer is: Upon mutual endorsement of purchase documents when cash or equivalents are received

An escrow account must be opened by the dealer upon the mutual endorsement of purchase documents when cash or equivalents are received. This timing is crucial as it ensures that the funds are securely held while the final details of the sale are being completed, preventing any potential disputes or mishandling of funds. The mutual endorsement represents the agreement between the buyer and seller, indicating that both parties are committed to the transaction. At this point, it is essential to establish an escrow to protect the interests of both parties and provide a clear and organized means to manage the funds until all conditions of the sale are met. This practice also adheres to legal and regulatory requirements, ensuring that both the dealer and the buyer have a transparent process in place. Opening an escrow account only upon receipt of cash for a resale unit or just before delivery of a new unit would not adequately protect either party involved in the transaction. It’s important to understand that the escrow account's primary function is to safeguard the funds throughout the entire purchasing process, starting from when all parties have agreed to the terms.