Tennessee Realtor State Practice Exam

Upon acceptance of a purchase offer, how soon must earnest money be deposited into an escrow account?

1. Within 24 hours

2. Immediately

3. Within 72 hours

4. By the closing date

The correct answer is: Immediately

The requirement for earnest money to be deposited into an escrow account immediately upon acceptance of a purchase offer is crucial in real estate transactions. This practice is designed to protect both the buyer and the seller by ensuring that the funds are promptly secured in an impartial third-party account, which can be accessed later during the closing process. Immediately depositing earnest money demonstrates the buyer's serious intent to purchase the property and reinforces their commitment to the agreement. This prompt action is typically stipulated in the purchase agreement and adheres to the customary practices in many real estate markets. It mitigates the risk of a buyer potentially backing out of the agreement without demonstrating good faith. Timely deposit of earnest money also helps to maintain trust in the transaction process, as it assures the seller that the buyer is taking the offer seriously and is financially prepared to move forward. This practice can also help avoid potential disputes regarding the timing and handling of earnest money, which is an essential aspect of smooth real estate transactions.