A Tennessee buyer and seller are in dispute over who is entitled to the $9,000 earnest money after the transaction falls through. The listing broker is holding the funds in escrow. The buyer claims the seller breached by failing to make agreed-upon repairs; the seller claims the buyer waived the repair contingency. The listing broker cannot resolve the dispute and is concerned about liability. Which action is most appropriate for the broker under Tennessee licensing law?
Correct Answer
B) Retain the funds in escrow and file an interpleader action in a Tennessee court of competent jurisdiction
Under Tennessee licensing law and TREC regulations, a broker holding disputed earnest money must not unilaterally release the funds to either party. The correct procedure is to retain the funds in the escrow account and, if the parties cannot reach a written agreement on disbursement, file an interpleader action in a Tennessee court. Interpleader allows the court to adjudicate the competing claims and directs the broker to pay the funds into court, relieving the broker of further liability. This protects the broker from accusations of improper disbursement.
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Related Topics & Key Terms
Key Terms:
Related Concepts
A time is of the essence clause in a contract means that all deadlines and dates specified in the agreement are strictly enforceable, and failure to meet them constitutes a material breach.
An appraisal contingency allows the buyer to cancel or renegotiate the contract if the property's appraised value comes in lower than the agreed-upon purchase price. This contingency protects buyers from overpaying.
An assignment of contract transfers one party's rights and obligations under a contract to a third party called the assignee. The original party, known as the assignor, transfers their contractual position to someone who was not originally part of the agreement.
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