Client/earnest money must be held in a separate escrow/trust account, never commingled with the broker's own funds.
Before you read
Test yourself first: 5 questions
Question 1 of 5
Where must a Tennessee affiliate broker deposit earnest money and other trust funds received in a transaction?
Answer: B. Trust funds such as earnest money must be turned over to the managing broker and held in the firm's separate escrow/trust account, never commingled with personal or operating funds.
Question 2 of 5
An affiliate broker in Tennessee receives an earnest money deposit on an accepted offer. What is the proper handling of those funds?
Answer: B. Earnest money and other client funds must be turned over to the firm and placed in the broker's separate escrow/trust account, not commingled with personal funds.
Question 3 of 5
Which of the following best describes a permissible use of a broker's escrow/trust account in Tennessee?
Answer: B. The escrow/trust account exists to hold entrusted funds such as earnest money separately from the broker's own funds; commingling or converting client money is prohibited.
Question 4 of 5
Under Tennessee Real Estate Commission (TREC) rules, where must a broker deposit earnest money and other funds belonging to others that come into the broker's possession in a transaction?
Answer: B. TREC requires a broker to maintain a separate escrow or trustee account, kept apart from the broker's own funds, for money belonging to others. Funds held for clients and customers may never be deposited into the broker's personal or general operating account.
Question 5 of 5
After an offer is accepted in Tennessee, a buyer's earnest-money check is delivered to the brokerage. TREC rules require the broker to handle the deposit by:
Answer: B. Funds belonging to others must be deposited promptly into the broker's escrow or trust account. Holding deposits indefinitely, releasing them directly to a party without authorization, or routing them through personal accounts are all improper.
Keep the streak going with more questions like these, each with a full rationale.
Must-know rules
- Sellers of residential property generally must provide a Residential Property Condition Disclosure.
- The disclosure covers the known condition of the property and material defects.
- Client/earnest money must be held in a separate escrow/trust account, never commingled with the broker's own funds.
- The managing/principal broker is responsible for the firm's trust account and proper handling of escrow.
- Pre-license education: 90 hours (60 Principles + 30 New Affiliates).
- E&O insurance is required for ALL active licensees.
- Tennessee is NOT a community property state (it is a separate/common-law property state).
- Federal lead-based paint disclosure also applies to qualifying pre-1978 housing.
TN Disclosures, Escrow/Trust Funds & Key Numbers: FAQs
Is TN Disclosures, Escrow/Trust Funds & Key Numbers on the real estate exam?
Yes. State License Law is a scored domain on the Tennessee real estate licensing exam, and this topic appears in the state license-law portion.
Is this cheat sheet free?
Yes — every page on Cinna RE's resource library is free to read, print and share. The app adds practice questions, mock exams and a readiness score.
Does Tennessee test this differently?
Tennessee applies its own license law on top of the national portion. This page covers the Tennessee rules specifically, which is what the state section of your exam tests.
