A Colorado buyer and seller are in dispute over who is entitled to the $10,000 earnest money after the transaction fell through. The buyer claims the seller breached; the seller claims the buyer defaulted. The earnest money is held by the listing brokerage. Under CREC rules, what must the broker do with the disputed earnest money?
Correct Answer
D) Retain the funds in the trust account and not disburse until the parties agree in writing or a court orders disbursement
Under CREC rules and the Colorado Real Estate License Act, when there is a dispute over earnest money, the broker must retain the funds in the trust account and may not disburse them without either a written agreement signed by both parties directing disbursement or a court order. Unilateral disbursement by the broker is a violation of license law.
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Related Topics & Key Terms
Key Terms:
Related Concepts
A breach of contract occurs when one party fails to perform their obligations under the contract without a legal excuse. The non-breaching party is entitled to legal remedies including damages, specific performance, or contract rescission.
Consideration is something of value exchanged between parties to a contract, making the agreement legally binding. It can be money, a promise to act, a promise to refrain from acting, or anything else of value.
Contingencies are conditions written into a real estate contract that must be met before the transaction can close. If a contingency is not satisfied, the buyer can typically cancel the contract without penalty.
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