If Steven's transaction fell through due to insufficient funds for financing, what is likely to happen?

When a transaction does not close due to insufficient funds for financing, it typically indicates that the buyer, in this case Steven, has failed to meet the necessary financial obligations outlined in the purchase agreement. This situation likely constitutes a breach of contract because the buyer is unable to secure the financing required to complete the purchase.

As a result of this breach, the seller may have the right to retain the earnest money deposit as a remedy for the buyer's failure to fulfill their contractual obligations. The earnest money is intended to demonstrate the buyer's commitment to the transaction, and if they are unable to proceed due to financial reasons, it can be forfeited to compensate the seller for the inconvenience or potential lost opportunities.

This understanding clarifies why the choice indicating Steven may forfeit his earnest money is the most appropriate. It reflects the principle that if a buyer cannot complete the purchase due to circumstances within their control, such as financing issues, they may face financial consequences as outlined in the contract.