A Michigan broker receives a buyer's earnest money check made payable to the broker's company. The purchase agreement falls through due to a financing contingency, and the buyer is entitled to a full refund. Before releasing the funds, the broker deducts $200 to cover administrative costs incurred during the transaction. Under Michigan law, this action is:
Correct Answer
C) A violation because the broker cannot unilaterally deduct fees from trust funds without written authorization from all parties
Under MCL 339.2512, trust funds must be disbursed only in accordance with the terms of the purchase agreement or with written authorization from all parties with an interest in the funds. A broker cannot unilaterally deduct administrative fees from earnest money held in trust, even if real costs were incurred. Any disbursement not authorized by the agreement or by all parties constitutes an improper disbursement of trust funds.
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Related Topics & Key Terms
Key Terms:
Related Concepts
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.
Broker supervision is the legal obligation of a designated or managing broker to oversee and be accountable for the real estate activities of all salespersons and associate brokers operating under their license.
Commingling is the illegal act of mixing client funds with a broker's personal or business operating funds, while conversion is the unauthorized use of client funds for the broker's own benefit. Both are serious violations that can result in license revocation.
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