Earnest money in South Carolina must be:
Question & Answer
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Held by seller
Holding earnest money directly with the seller creates an unacceptable conflict of interest and exposes the buyer to significant financial risk, as the seller could spend the funds or refuse to return them in a dispute — this is why neutral escrow holding is required rather than seller possession.
Deposited in escrow per contract terms
Given to buyer
Giving the earnest money directly to the buyer makes no logical sense in the context of a real estate transaction, as earnest money is the buyer's deposit demonstrating commitment to the purchase — returning it immediately to the buyer would eliminate its purpose as a good-faith deposit.
No requirements
Stating there are no requirements for earnest money handling is dangerously incorrect; South Carolina's licensing laws and real estate commission regulations impose specific obligations on licensees regarding the timely deposit and proper handling of client funds, with violations potentially resulting in license suspension or revocation.
Why is this correct?
Option B is correct because South Carolina real estate practice and the South Carolina Real Estate Commission's rules require that earnest money be deposited into an escrow or trust account in accordance with the terms specified in the purchase contract, typically within a defined number of days after contract execution. This protects the buyer's funds from misappropriation while also ensuring the seller has documented evidence of the buyer's financial commitment. The contract itself governs the specific escrow holder, deposit timeline, and conditions under which the funds may be released.
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