CTC CTC Financial Transactions and Escrow

Question 1

What is 'earnest money' in a real estate transaction?

Accepted Answer

A deposit made by the buyer to demonstrate serious intent to purchase

Answer

The commission paid to the listing agent at closing

Answer

A fee charged by the title company for escrow services

Answer

The full down payment submitted on the day of closing

Question 2

Who typically holds the earnest money deposit during a real estate transaction?

Accepted Answer

An escrow company, title company, or broker's trust account

Answer

The buyer's personal savings account

Answer

The listing agent's personal bank account

Answer

The seller directly upon acceptance of the offer

Question 3

What is the primary role of an escrow officer in a real estate transaction?

Accepted Answer

To act as a neutral third party that manages funds and documents until all conditions are met

Answer

To represent the buyer's interests in price negotiations

Answer

To conduct the physical home inspection

Answer

To approve or deny the buyer's mortgage application

Question 4

When must a transaction coordinator verify that the earnest money deposit has been received?

Accepted Answer

Within the timeframe specified in the purchase agreement

Answer

Only at the time of the final closing

Answer

After the home inspection report is delivered

Answer

When the seller verbally accepts the initial offer

Question 5

What happens to earnest money if the buyer backs out of a transaction without a valid contingency?

Accepted Answer

The seller may be entitled to keep the earnest money as liquidated damages

Answer

The earnest money is always returned to the buyer unconditionally

Answer

The earnest money is split equally between buyer and seller by default

Answer

The title company retains the earnest money as an administrative fee

Question 6

What is the key difference between an escrow account and a broker's trust account?

Accepted Answer

Escrow accounts are transaction-specific while trust accounts hold various client funds for a brokerage

Answer

Trust accounts are used exclusively for mortgage payment processing

Answer

Escrow accounts earn higher regulated interest than trust accounts

Answer

There is no meaningful legal difference between the two account types