A purchase and sale agreement in Maine contains a clause stating that the buyer's earnest money deposit of $10,000 shall be held in the designated broker's escrow account. Before closing, the buyer defaults on the contract without a valid contingency basis. The seller demands the full $10,000 as liquidated damages. The buyer demands return of the deposit. The designated broker at Coastal Realty is unsure how to proceed. Under the Maine Real Estate Brokerage Act, what is the designated broker's correct course of action?
Correct Answer
D) Retain the deposit in escrow and seek a written release signed by both parties or await a court order before disbursing
Under the Maine Real Estate Brokerage Act (32 M.R.S. § 13001 et seq.) and MREC regulations governing trust accounts, when there is a dispute over earnest money held in a designated broker's escrow account, the designated broker must retain the funds in escrow until the dispute is resolved. The broker may not unilaterally release the funds to either party. Resolution requires either a written release agreement signed by all parties or a court order directing disbursement. Unilateral release to either party without authorization could constitute a violation of the broker's trust account obligations and result in license discipline.
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Related Topics & Key Terms
Key Terms:
Related Concepts
The Statute of Frauds is a legal requirement that certain types of contracts must be in writing and signed to be enforceable. In real estate, all contracts for the sale of land or interests in land must be in writing.
A time is of the essence clause in a contract means that all deadlines and dates specified in the agreement are strictly enforceable, and failure to meet them constitutes a material breach.
An appraisal contingency allows the buyer to cancel or renegotiate the contract if the property's appraised value comes in lower than the agreed-upon purchase price. This contingency protects buyers from overpaying.
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