Buyer Chen wants to increase her earnest money deposit from $2,000 to $5,000 to strengthen her offer in a multiple offer situation. How should this additional deposit be handled?
Correct Answer
A) Add it to the original escrow account within 3 business days
Correct: Additional earnest money deposits must be handled the same as original deposits - placed in escrow within 3 business days. Why not B: Funds should be collected and escrowed when received. Why not C: Cannot give earnest money directly to seller. Why not D: Improper handling of client funds.
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Related Topics & Key Terms
Key Terms:
Related Concepts
Earnest money is a deposit made by the buyer at the time of the offer or shortly after to demonstrate good faith and serious intent to purchase the property. It is also called a good faith deposit.
Equitable title is the buyer's interest in a property after a purchase contract is signed but before closing, giving the buyer the right to acquire legal title in the future. The seller retains legal title until the deed is delivered at closing.
A financing contingency makes the purchase contract conditional upon the buyer obtaining mortgage approval within a specified time period. If the buyer cannot secure financing, they can cancel the contract and receive their earnest money back.
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Previous Question
A property sells for $320,000. The earnest money deposit was $6,400, and the buyer is obtaining an 80% loan. At closing, how much additional cash will the buyer need for the down payment (excluding closing costs)?
Next Question
A broker may release earnest money deposits in all of the following situations EXCEPT: