Jennifer, a licensed affiliate broker in Knoxville, is representing the seller in a transaction. The buyer submits a written purchase offer that includes an earnest money deposit of $5,000. Jennifer's broker holds the earnest money in the firm's escrow account. The buyer later defaults on the contract. Under Tennessee practice, who has the authority to determine how the earnest money is disbursed?
Correct Answer
C) The broker holding the escrow funds must disburse according to the contract terms or written agreement of both parties, or obtain a court order
Under Tennessee real estate practice and TREC regulations, a broker holding earnest money in escrow may not disburse the funds unilaterally upon a dispute. The broker must disburse according to the written terms of the purchase contract, obtain written agreement from both parties authorizing disbursement, or obtain a court order. This protects all parties and prevents the broker from acting as an arbiter of the dispute.
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Related Topics & Key Terms
Key Terms:
Related Concepts
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.
An inspection contingency gives the buyer the right to have the property professionally inspected within a specified time frame and to negotiate repairs or cancel the contract based on the findings.
Liquidated damages are a predetermined amount of money specified in the contract that the non-breaching party is entitled to receive if the other party breaches. In real estate, the earnest money deposit typically serves as liquidated damages.
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