David signs a purchase agreement to buy a house in Salina, Kansas for $210,000 and deposits $5,000 in earnest money with the listing broker. Before closing, David discovers a material defect that the seller failed to disclose on the Kansas Residential Real Property Disclosure Statement. David demands return of his earnest money and the seller refuses. Under Kansas law, where must the listing broker hold the disputed earnest money while the dispute is being resolved?
Correct Answer
B) In the broker's trust account until the dispute is resolved by the parties or a court
Under the Kansas Real Estate Brokers' and Salespersons' License Act (K.S.A. 58-3034 et seq.) and KREC regulations, a broker must maintain all client funds, including earnest money, in a separate trust account. When a dispute arises over earnest money, the broker must continue to hold the funds in the trust account until the dispute is resolved — either by written agreement of the parties or by a court order. Disbursing disputed funds to either party without authorization is a violation of Kansas license law.
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Related Topics & Key Terms
Key Terms:
Related Concepts
A breach of contract occurs when one party fails to perform their obligations under the contract without a legal excuse. The non-breaching party is entitled to legal remedies including damages, specific performance, or contract rescission.
Consideration is something of value exchanged between parties to a contract, making the agreement legally binding. It can be money, a promise to act, a promise to refrain from acting, or anything else of value.
Contingencies are conditions written into a real estate contract that must be met before the transaction can close. If a contingency is not satisfied, the buyer can typically cancel the contract without penalty.
More Contracts Questions
Which of the following is required for a valid contract in California?
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A contract formed for an illegal purpose is considered:
After a residential purchase contract has been signed by both parties in Illinois, the buyer and seller verbally agree to change the closing date. What is the legally sound way to document this change?
Specific performance in North Dakota:
- → In a contract for deed (land contract), who retains legal title to the property until the purchase price is fully paid?
- → Which of the following is NOT required for a valid bill of sale?
- → A Nevada real estate salesperson is helping a buyer draft a purchase agreement. Which of the following is NOT a required element for a Nevada residential purchase agreement to be legally enforceable?
- → Sawyer Iverson is reviewing an Illinois issue in Joliet. The person assumes that attorney review automatically replaces every inspection, appraisal, or financing deadline in a standard Illinois residential contract. Which statement best applies?
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- → Avery Jenkins is reviewing an Illinois issue in Normal. The person asks what happens if neither attorney sends a disapproval or proposed change during the standard review period. Which statement best applies?
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- → Johnny wants the seller's patio furniture included in his purchase of a house. Before the offer is signed and delivered to the seller, he asks his agent to attach a page covering the furniture to the offer. That attached page is best described as:
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