An earnest money dispute arises between a buyer and seller after a residential transaction falls through. What is the broker's proper course of action regarding the escrowed funds?
Correct Answer
A) Hold the funds and disburse only upon written agreement of both parties or other lawful authority, such as a court order.
Under the Illinois Real Estate License Act (225 ILCS 454) and standard escrow practice, a broker holding disputed earnest money may not unilaterally decide which party deserves the funds. The broker must retain the funds in escrow and disburse them only upon a lawful release path — such as written mutual consent of both parties, a court order, or other legal authority. Unilateral disbursement exposes the broker to liability and potential license discipline.
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Related Topics & Key Terms
Key Terms:
Related Concepts
An option contract gives one party the exclusive right, but not the obligation, to purchase or lease a property at a specified price within a specified time period. The buyer pays option consideration to keep the option open.
A purchase agreement is a legally binding contract between a buyer and seller that outlines the terms and conditions for the sale of real property. It is also commonly called a sales contract, purchase and sale agreement, or earnest money agreement.
Specific performance is a court-ordered remedy that compels the breaching party to fulfill their obligations under the contract rather than simply paying monetary damages. It is an equitable remedy used when monetary damages would be inadequate.
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