Which institutions can hold earnest money?

Which institutions can hold earnest money?

• A. Escrow agents
• B. Title companies, banks, savings and loans and credit unions
• C. Mortgage lenders
• D. Real estate brokers

Answer: (B)

Earnest money must be held by a neutral, trusted third party to protect both buyer and seller and keep funds separate from either party’s accounts. In real estate, the standard neutral holders are title companies, banks, savings and loans, and credit unions. These institutions manage escrow or closing services and maintain trust accounts, providing clear records and regulated oversight. That is why they’re the best fit for holding earnest money. Escrow agents can play a similar role, but the focus here is on established institutions that regularly handle escrow in many jurisdictions. Mortgage lenders aren’t typically the party to hold earnest money, since their role is to fund the loan rather than act as a neutral holder. Real estate brokers may hold funds in some cases, but many places require funds to be held by a licensed institution or title/escrow company to avoid conflicts of interest.

Earnest money must be held by a neutral, trusted third party to protect both buyer and seller and keep funds separate from either party’s accounts. In real estate, the standard neutral holders are title companies, banks, savings and loans, and credit unions. These institutions manage escrow or closing services and maintain trust accounts, providing clear records and regulated oversight. That is why they’re the best fit for holding earnest money.

Escrow agents can play a similar role, but the focus here is on established institutions that regularly handle escrow in many jurisdictions. Mortgage lenders aren’t typically the party to hold earnest money, since their role is to fund the loan rather than act as a neutral holder. Real estate brokers may hold funds in some cases, but many places require funds to be held by a licensed institution or title/escrow company to avoid conflicts of interest.