Tennessee Real Estate Broker Exam — All Questions
3 questions
When a Tennessee affiliate broker receives an earnest-money check from a buyer, the funds must be:
- a.Deposited into the affiliate broker's personal account until closing
- b.Delivered promptly to the principal broker to be held in the firm's escrow account✓
- c.Given to the seller right away
- d.Mailed to TREC
Client money such as earnest money must be handled through the firm's escrow/trust account, which the principal broker controls. An affiliate broker who receives funds must deliver them promptly to the principal broker rather than holding them personally, and trust money may not be commingled with the broker's personal or business funds.
If the buyer and seller make conflicting demands for an earnest-money deposit the Tennessee principal broker is holding, the prudent course is to:
- a.Release the money to whichever party demands it first
- b.Keep the deposit as an additional commission
- c.Retain the funds in escrow until the parties agree in writing or a court resolves the dispute✓
- d.Split the deposit evenly without consent
A broker holding a disputed deposit is a neutral stakeholder and must not unilaterally decide who is entitled to the funds. The safe practice is to keep the money in escrow until the parties agree in writing, a court directs disbursement, or another lawful method such as interpleader is used. Releasing disputed money on one party's demand exposes the broker to liability.
In Tennessee, responsibility for keeping accurate escrow-account records and reconciling the account rests primarily with the:
- a.Principal broker who controls the account✓
- b.Individual affiliate broker on each deal
- c.County register of deeds
- d.Buyer's lender
The principal broker who controls the firm's escrow account is responsible for keeping accurate records and reconciling the account so that every client's funds can be shown to be intact. Complete records protect consumers and the broker; unexplained shortages or poor records are grounds for discipline. This is a broker-level supervisory duty, not the affiliate broker's.