When may earnest money be held in the trust account of a third party?

When may earnest money be held in the trust account of a third party?

• A. Only with court order
• B. With permission of the parties
• C. Never
• D. With the consent of the seller

Answer: (B)

Mutual written consent is required for a third party to hold earnest money. In practice, the buyer and seller designate a neutral custodian—such as an escrow company, attorney, or title company—to hold the funds in a trust account, with release governed by the contract. This setup protects both sides by ensuring the funds are not controlled by either party and are released only under agreed conditions (closing, termination, or a specified contingency). A court order may come into play to resolve disputes, but it’s not the normal method for selecting a third-party holder. Consent of just the seller doesn’t suffice because both parties must agree to the arrangement.

Mutual written consent is required for a third party to hold earnest money. In practice, the buyer and seller designate a neutral custodian—such as an escrow company, attorney, or title company—to hold the funds in a trust account, with release governed by the contract. This setup protects both sides by ensuring the funds are not controlled by either party and are released only under agreed conditions (closing, termination, or a specified contingency). A court order may come into play to resolve disputes, but it’s not the normal method for selecting a third-party holder. Consent of just the seller doesn’t suffice because both parties must agree to the arrangement.