Buyer Hoffman signs a purchase and sale agreement for an Oregon property and deposits $10,000 earnest money with the listing brokerage's trust account. Before closing, Hoffman discovers the seller made fraudulent misrepresentations about the property's condition and wants to rescind the contract. The seller refuses to release the earnest money. Under Oregon law, where is the earnest money held and what is the broker's obligation?
Correct Answer
B) The earnest money is held in the brokerage's trust account, and the broker must not release it without written agreement of both parties or a court order
Under ORS 696.241 and OREA administrative rules, earnest money received by a broker must be deposited into the principal broker's trust account. When a dispute arises between buyer and seller over the disposition of earnest money, the broker is legally prohibited from releasing the funds to either party without either: (1) written agreement signed by both parties authorizing the release, or (2) a court order directing the disposition. The broker must hold the funds in trust until the dispute is resolved through one of these means. Unilaterally releasing funds to either party would constitute a violation of Oregon's trust account rules.
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Related Topics & Key Terms
Key Terms:
Related Concepts
Consideration is something of value exchanged between parties to a contract, making the agreement legally binding. It can be money, a promise to act, a promise to refrain from acting, or anything else of value.
Contingencies are conditions written into a real estate contract that must be met before the transaction can close. If a contingency is not satisfied, the buyer can typically cancel the contract without penalty.
Contract termination occurs when a contract is ended or discharged, releasing both parties from their obligations. A contract can be terminated through performance, mutual agreement, operation of law, or breach.
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