Broker Amy is holding earnest money in her trust account for a residential transaction in Mitchell, South Dakota. The transaction falls through, and both the buyer and seller are claiming the earnest money. The parties cannot reach an agreement. Under South Dakota law, what is Amy's most appropriate course of action?
Correct Answer
B) Amy should retain the earnest money in the trust account until she receives a written agreement from both parties or a court order directing disbursement.
Under South Dakota trust account rules (SDCL 36-21A-81 through 36-21A-90), when there is a dispute over earnest money, the broker must retain the funds in the trust account until the dispute is resolved. The broker should not unilaterally disburse to either party without a written agreement signed by all parties or a court order. Improper disbursement exposes the broker to disciplinary action by the SDREC.
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Related Topics & Key Terms
Key Terms:
Related Concepts
An option contract gives one party the exclusive right, but not the obligation, to purchase or lease a property at a specified price within a specified time period. The buyer pays option consideration to keep the option open.
A purchase agreement is a legally binding contract between a buyer and seller that outlines the terms and conditions for the sale of real property. It is also commonly called a sales contract, purchase and sale agreement, or earnest money agreement.
Specific performance is a court-ordered remedy that compels the breaching party to fulfill their obligations under the contract rather than simply paying monetary damages. It is an equitable remedy used when monetary damages would be inadequate.
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