Broker Tom is closing a residential transaction in St. Paul. The purchase agreement specifies that the $8,000 earnest money deposit held in Tom's trust account is to be credited to the buyer at closing. The transaction closes successfully. What is the proper handling of the earnest money funds after closing?
Correct Answer
B) Tom may disburse the earnest money in accordance with the closing settlement statement and the terms of the purchase agreement
Under Minn. Stat. Ch. 82, trust funds must be disbursed in accordance with the terms of the transaction — specifically, the purchase agreement and the closing settlement statement. Once the transaction closes, the earnest money credited to the buyer reduces the buyer's cash due at closing, and the broker disburses funds as directed by the settlement statement. This is the proper and lawful disposition of trust funds upon successful closing.
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Related Topics & Key Terms
Key Terms:
Related Concepts
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.
Commingling is the illegal act of mixing client trust funds with a broker's personal or business operating funds; conversion is the misappropriation of those funds.
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