A real estate transaction falls through after the seller refuses to release a $4,000 earnest money deposit held in Broker Tom's trust account. The buyer demands the return of the deposit, but the seller insists the deposit is forfeit under the contract. Tom is uncertain who is entitled to the funds. What is Tom's correct course of action under Tennessee law?
Correct Answer
C) Tom must retain the disputed funds in the trust account and may interplead the funds with a court of competent jurisdiction
Under Tennessee license law and TREC rules, when there is a bona fide dispute over earnest money, the broker must retain the funds in the trust account until the dispute is resolved. The broker should not unilaterally release funds to either party. The appropriate legal remedy is to interplead the funds with a court of competent jurisdiction, allowing the court to determine the rightful recipient. This protects the broker from liability and ensures the funds are handled lawfully.
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Related Topics & Key Terms
Key Terms:
Related Concepts
A tie-in arrangement is an illegal antitrust practice in which a seller conditions the purchase of one product or service on the buyer's agreement to purchase a separate product or service.
A trust account, also called an escrow account, is a separate bank account maintained by a broker to hold funds belonging to others, such as earnest money deposits, security deposits, or other client funds.
Advertising regulations govern how real estate licensees may market properties and services, requiring truthful, non-deceptive advertising that includes proper identification of the brokerage.
More Practice Of Real Estate Questions
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