Broker Chen holds earnest money in her trust account for a failed Utah transaction. The buyer claims the seller breached the contract and demands the earnest money back. The seller claims the buyer defaulted and demands the earnest money. Both parties have submitted written demands. Under Utah Administrative Code R162-2f, what is Broker Chen's most appropriate course of action?
Correct Answer
A) Broker Chen should retain the earnest money in the trust account and interplead the funds with a court or seek a written agreement from both parties before releasing
Under Utah Administrative Code R162-2f, when there is a dispute over earnest money and both parties have made competing written demands, the broker must NOT release the funds to either party without a written agreement signed by both parties or a court order. The broker's appropriate action is to retain the funds in the trust account and either obtain a mutual written release agreement or interplead the funds with a court. Releasing to either party unilaterally exposes the broker to liability and potential disciplinary action.
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Related Topics & Key Terms
Key Terms:
Related Concepts
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.
Liquidated damages are a predetermined amount of money specified in the contract that the non-breaching party is entitled to receive if the other party breaches. In real estate, the earnest money deposit typically serves as liquidated damages.
Novation is the substitution of a new contract for an existing one, or the replacement of one party with a new party, with the consent of all parties involved. The original party is completely released from all obligations.
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