Housing and Community Development (HCD) Practice Exam

What must be done with all funds for accessories and their installation during the sale of a new manufactured home?

1. All funds must be placed into escrow

2. The funds can be disbursed at the close of escrow without restrictions

3. The dealer is permitted to manage the funds independently

4. Funds may be deposited in a separate account for the dealer

The correct answer is: All funds must be placed into escrow

Placing all funds for accessories and their installation into escrow ensures a level of protection for both the buyer and the seller during the transaction. Escrow acts as a neutral third party that holds the funds until the agreed-upon terms of the sale are fulfilled. This arrangement helps to guarantee that the buyer's funds will only be released when the dealer has completed the necessary work on the accessories, thus safeguarding the buyer from any potential issues with the installation or quality of the accessories. Additionally, using escrow diminishes the risk of mismanagement or misuse of funds, ensuring transparency in the transaction process. It's essential in the context of manufactured home sales, where specific regulations and standards must be met, to clearly delineate the handling of funds related to additional customized features like accessories. The other options would not provide the same level of assurance for the buyer and might lead to complications or disputes down the line regarding fund allocation and the completion of work.