Broker Patricia in Rhode Island receives an earnest money deposit from a buyer at the time of an offer. The offer is subsequently rejected by the seller. Under Rhode Island law, what must Patricia do with the earnest money?
Correct Answer
A) Patricia must promptly return the earnest money to the buyer upon rejection of the offer
Under R.I. Gen. Laws § 5-20.5, earnest money deposits held by a broker are trust funds that must be handled in accordance with the parties' agreement and applicable law. When an offer is rejected, the deposit belongs to the buyer and must be promptly returned. The broker has no right to retain the funds as compensation, and there is no mandatory 30-day holding period when the offer is simply rejected.
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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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