A buyer and seller both claim entitlement to the earnest money held in a broker's escrow account after a transaction falls through. Neither party has provided written disbursement instructions. Under Illinois law, what is the broker's proper course of action?
Correct Answer
C) Follow an authorized release path — such as obtaining written agreement from both parties or seeking interpleader — rather than making a unilateral disbursement decision.
Under 225 ILCS 454/10-30, an Illinois licensee who holds escrow funds must disburse them only pursuant to proper authorization — such as written consent of all parties, a court order, or interpleader. The broker is not empowered to adjudicate the dispute and make a unilateral disbursement decision. Improper disbursement can constitute a violation of the Illinois Real Estate License Act of 2000 and expose the broker to license discipline.
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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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