Tennessee Realtor State Practice Exam

When can Susie expect the earnest money to be applied toward her property purchase?

1. After the seller signs the contract.

2. When conditions are met at closing.

3. Immediately upon deposit.

4. After the inspection period ends.

The correct answer is: When conditions are met at closing.

The earnest money is generally applied toward the purchase price of the property at closing, which is why the correct response indicates that Susie can expect the earnest money to be applied when conditions are met at closing. At this point, all contingencies, such as inspections and financing, should have been satisfied, allowing for a smooth transition of funds to complete the purchase. This process ensures that the earnest money serves its purpose as a show of good faith from the buyer, signifying their commitment to the transaction. During the closing process, the earnest money typically becomes a part of the overall financing, either reducing the amount the buyer needs to provide at closing or being credited against the purchase price. In contrast, the other options suggest various times for the application of earnest money that may not align with standard real estate practices. For instance, while the seller signing the contract is a crucial step in the transaction, the earnest money does not get applied until all terms are finalized at closing. Additionally, while earnest money may be deposited immediately after it is provided, its application toward the purchase price occurs later. Finally, the end of the inspection period indicates that the buyer should proceed with the purchase, but it does not itself trigger the application of the earnest money, which still waits