A buyer and seller in Pocatello, Idaho have signed a purchase agreement. The buyer's agent holds the $8,000 earnest money deposit in the brokerage's trust account. The transaction falls through because the seller refuses to make agreed-upon repairs. Both parties now claim the earnest money. Which of the following describes the broker's correct course of action under Idaho law?
Correct Answer
B) The broker should hold the earnest money in trust until the parties reach a written agreement or a court orders disbursement
Under Idaho Real Estate License Act rules governing trust accounts (I.C. § 54-2049), when there is a dispute over earnest money, the broker must retain the funds in the trust account and may not disburse them unilaterally. The broker must hold the funds until the parties reach a written mutual release agreement or a court of competent jurisdiction orders disbursement. Unilateral release exposes the broker to disciplinary action.
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Related Topics & Key Terms
Key Terms:
Related Concepts
A financing contingency makes the purchase contract conditional upon the buyer obtaining mortgage approval within a specified time period. If the buyer cannot secure financing, they can cancel the contract and receive their earnest money back.
An inspection contingency gives the buyer the right to have the property professionally inspected within a specified time frame and to negotiate repairs or cancel the contract based on the findings.
Liquidated damages are a predetermined amount of money specified in the contract that the non-breaching party is entitled to receive if the other party breaches. In real estate, the earnest money deposit typically serves as liquidated damages.
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