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

Earnest money is a good-faith deposit from the buyer showing serious intent to purchase, which is typically credited toward the purchase price at 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

Earnest money is held in a neutral third-party account — such as escrow, title company, or a broker's trust account — until the transaction closes or is cancelled.

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

An escrow officer serves as a neutral intermediary who holds funds and documents, ensuring all contractual conditions are fulfilled before the transaction closes.

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

The TC must confirm earnest money deposit within the timeline defined in the purchase contract, as failure to deposit on time can constitute a breach of contract.

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

If a buyer defaults without exercising a valid contractual contingency, the seller may be entitled to retain the earnest money as liquidated damages for lost time and opportunity.

CTC - Certified Transaction Coordinator Practice Test

CTC - Certified Transaction Coordinator Practice Test

CTC CTC Financial Transactions and Escrow