Earnest money deposits in New Jersey must be held:
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By the seller
Allowing the seller to hold the earnest money would create an obvious conflict of interest, as a seller who retains the deposit has a financial incentive to claim a buyer default even when none occurred, leaving the buyer with no neutral third-party protection.
In the broker's trust account or attorney escrow
By the buyer
Permitting the buyer to hold their own earnest money would eliminate the entire purpose of the deposit as a good-faith commitment to the seller, since the buyer could simply withdraw the funds at any time without consequence.
No requirements exist
New Jersey has very specific and detailed requirements for earnest money handling; the idea that no requirements exist is factually incorrect and contradicts the New Jersey Real Estate License Act's explicit trust account provisions.
Why is this correct?
New Jersey Real Estate Commission regulations and the New Jersey Real Estate License Act require that earnest money deposits be placed in a separate, non-commingled trust account maintained by the broker or held in an attorney's escrow account, with the funds remaining there until the transaction closes or the contract is lawfully terminated. The dual-option framework acknowledges New Jersey's attorney-closing tradition while ensuring that brokers who handle deposits do so in a fiduciary capacity with strict accounting obligations. Failure to properly escrow funds can result in license suspension, fines, and criminal charges for conversion of funds.
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