A buyer and seller are disputing who is entitled to the earnest money after a failed Illinois transaction, and both parties are pressuring the broker to release the funds. Which of the following actions by the broker would be IMPROPER under Illinois law and practice?
Correct Answer
D) Releasing the earnest money to whichever party contacts the brokerage office first to claim it.
Under Illinois law and the Illinois Real Estate License Act, a broker holding disputed earnest money in escrow may not unilaterally release those funds based on informal or arbitrary criteria such as who calls first. The broker must hold the funds until receiving a signed written release from all parties, a court order, or another legally authorized disbursement instruction. Releasing funds to the first caller exposes the broker to liability and violates fiduciary and escrow obligations.
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Related Topics & Key Terms
Key Terms:
Related Concepts
Equitable title is the buyer's interest in a property after a purchase contract is signed but before closing, giving the buyer the right to acquire legal title in the future. The seller retains legal title until the deed is delivered at closing.
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.
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