Broker Lisa holds a $10,000 earnest money deposit in her trust account for a transaction that has fallen through. The buyer claims the seller breached the contract and demands the earnest money back. The seller claims the buyer breached and demands the earnest money be released to her. Both parties have submitted written demands to Lisa. Under Minn. Stat. Ch. 82 and Minnesota Department of Commerce rules, what is Lisa's most appropriate course of action?
Correct Answer
A) Lisa should retain the earnest money in the trust account and may interplead the funds with a court or follow the dispute resolution procedures required under Minnesota law until the dispute is resolved
Under Minn. Stat. Ch. 82 and MN DOC rules, when there is a bona fide dispute over earnest money held in a broker's trust account, the broker must not release the funds to either party unilaterally. The broker's obligation is to hold the funds in the trust account and follow proper dispute resolution procedures, which may include interpleading the funds with a court (depositing the funds with the court and letting the parties litigate ownership) or following any applicable contractual dispute resolution process. Releasing funds unilaterally exposes the broker to license discipline.
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Related Topics & Key Terms
Key Terms:
Related Concepts
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.
A financing contingency makes the purchase contract conditional upon the buyer obtaining mortgage approval within a specified time period. If the buyer cannot secure financing, they can cancel the contract and receive their earnest money back.
An inspection contingency gives the buyer the right to have the property professionally inspected within a specified time frame and to negotiate repairs or cancel the contract based on the findings.
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