A buyer and seller in Baton Rouge execute a purchase agreement for a home. The seller's agent holds a $10,000 earnest money deposit in the brokerage's trust account. The transaction falls through due to a dispute over who is at fault. Neither party will agree to release the funds. Under LREC rules, what should the broker do with the disputed earnest money?
Correct Answer
A) Retain the funds in the trust account and seek written authorization from both parties or await a court order
Under LREC regulations and Louisiana real estate license law (La. R.S. 37:1455), when there is a dispute over earnest money held in a broker's trust account, the broker must not disburse the funds unilaterally to either party. The broker must retain the funds in the trust account until the parties provide written authorization for disbursement, or until a court of competent jurisdiction orders the release. Unilateral disbursement without authorization is a violation of trust account rules and grounds for disciplinary action.
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Related Topics & Key Terms
Key Terms:
Related Concepts
A counteroffer is a response to an original offer that changes one or more terms of the offer, effectively rejecting the original offer and creating a new offer. The party who makes the counteroffer becomes the new offeror.
Earnest money is a deposit made by the buyer at the time of the offer or shortly after to demonstrate good faith and serious intent to purchase the property. It is also called a good faith deposit.
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.
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