Broker David in Massachusetts holds a $25,000 earnest money deposit in his trust account. The sale falls through due to a dispute between the buyer and seller over who is entitled to the deposit. What should David do with the funds?
Correct Answer
C) Continue to hold the funds in the trust account until the dispute is resolved by agreement or court order
Under Massachusetts Board regulations (254 CMR 3.00) and the broker's fiduciary duties, when a dispute arises over entitlement to trust funds, the broker must continue to hold the funds in the trust account until the dispute is resolved — either by written agreement of all parties or by a court order directing disbursement. Releasing funds to either party without authorization exposes the broker to liability.
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Related Topics & Key Terms
Key Terms:
Related Concepts
A trust account, also called an escrow account, is a separate bank account maintained by a broker to hold funds belonging to others, such as earnest money deposits, security deposits, or other client funds.
Advertising regulations govern how real estate licensees may market properties and services, requiring truthful, non-deceptive advertising that includes proper identification of the brokerage.
Antitrust violations in real estate occur when competing brokerages or agents engage in practices that restrain trade, reduce competition, or harm consumers through collusion. These violations are governed by the Sherman Antitrust Act and can result in severe penalties.
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