A Washington purchase and sale agreement is mutually rescinded by the buyer and seller after the seller fails to disclose a known material defect. Both parties sign a written mutual release agreement directing the listing firm to return the $18,000 earnest money to the buyer. The listing firm's designated broker, however, believes the buyer's broker is also owed a commission from the earnest money under a separate agreement. The designated broker refuses to release the full $18,000 to the buyer. Under Washington law, what should the designated broker do?
Correct Answer
B) Release the full $18,000 to the buyer as directed by the mutual release agreement
Under RCW 18.85 and WAC 308-124D, when both parties have signed a written mutual release agreement directing disbursement of earnest money, the broker must release the funds as directed. The designated broker's separate commission dispute with the buyer's broker is not a basis for withholding earnest money from the buyer. Commission disputes must be resolved through separate legal channels — the trust account funds belong to the parties, not the broker, and cannot be used to satisfy the broker's own commission claims.
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Related Topics & Key Terms
Key Terms:
Related Concepts
Equitable title is the buyer's interest in a property after a purchase contract is signed but before closing, giving the buyer the right to acquire legal title in the future. The seller retains legal title until the deed is delivered at closing.
A financing contingency makes the purchase contract conditional upon the buyer obtaining mortgage approval within a specified time period. If the buyer cannot secure financing, they can cancel the contract and receive their earnest money back.
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.
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- → A Rhode Island licensee encounters a listing contract is drafted. What should the licensee remember?
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