Affiliate Broker Tennessee (TN PSI) National Practice Exam `

As an escrow agent, what is true about how Georgina will handle disbursement of funds if the transaction doesn’t close?

1. She will keep the funds

2. She will disburse the earnest money as instructed or according to state law

3. She will distribute the funds to a charity

4. She will return the funds to the buyer only

The correct answer is: She will disburse the earnest money as instructed or according to state law

In the role of an escrow agent, Georgina is obligated to handle the disbursement of funds in a manner that is aligned with the terms outlined in the purchase agreement, any instruction provided by the parties involved, and relevant state laws governing real estate transactions. If a transaction does not close, the standard and most legally appropriate action for the escrow agent is to return or disburse the earnest money based on the conditions set forth in the agreement. Typically, this could mean returning the funds to the buyer, but it might also involve disbursing funds to the seller if the terms of the transaction or state law allow for such action. This ensures that funds are managed in a fair and lawful manner, reflecting the expectations and agreements of the parties involved. This adherence to legal and contractual obligations is crucial in maintaining the integrity of the escrow process and protecting the interests of all parties. Consequently, the answer reflects the responsibilities of the escrow agent regarding disbursement of funds when a transaction does not proceed to closing.