Contracts
In NJ, a buyer's deposit check that is returned for insufficient funds after being deposited in the broker's escrow account creates:
AAn automatic voiding of the contract
BA potential default by the buyer and requires prompt notification of both seller and broker's own bank; the broker may need to take action to protect escrow funds✓ Correct
CA criminal charge against the broker
DAn obligation for the seller to accept an alternative payment
Explanation
A returned escrow check is a serious matter. The broker must promptly notify all parties and take appropriate steps (replace the funds, notify the seller of the buyer's potential default) to protect the escrow account and fulfill fiduciary obligations.
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Key Terms to Know
Escrow
A neutral third-party arrangement where funds, documents, and instructions are held until all conditions of a real estate transaction are satisfied.
Earnest MoneyA deposit made by the buyer when submitting a purchase offer, demonstrating serious intent and serving as consideration for the contract.
Option ContractA contract giving the buyer the right, but not the obligation, to purchase a property at a specified price within a specified time period.
ContingencyA condition in a purchase contract that must be satisfied before the sale can proceed to closing.
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