Tom lists his Ames home and receives an offer from buyer Linda for $310,000 with $5,000 earnest money. Tom's broker holds the earnest money in the firm's trust account. The transaction falls through due to a disputed breach, and both parties claim the earnest money. Under Iowa Code Chapter 543B, what is the broker's proper course of action regarding the disputed earnest money?
Correct Answer
C) Retain the earnest money in the trust account and seek a written release from both parties or await a court order before disbursing
Under Iowa Code Chapter 543B and Iowa Administrative Code 193E, when earnest money is disputed, the broker must retain the funds in the trust account and may not disburse them unilaterally. The broker should obtain a written release signed by all parties or await a court order or arbitration decision directing disbursement. Unilateral release exposes the broker to disciplinary action by IREC.
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Related Topics & Key Terms
Key Terms:
Related Concepts
Contract termination occurs when a contract is ended or discharged, releasing both parties from their obligations. A contract can be terminated through performance, mutual agreement, operation of law, or breach.
A counteroffer is a response to an original offer that changes one or more terms of the offer, effectively rejecting the original offer and creating a new offer. The party who makes the counteroffer becomes the new offeror.
Earnest money is a deposit made by the buyer at the time of the offer or shortly after to demonstrate good faith and serious intent to purchase the property. It is also called a good faith deposit.
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