Pacific Northwest Realty, a Washington brokerage, holds a $15,000 earnest money deposit in trust. The purchase and sale agreement states that earnest money is to be released to the seller if the buyer fails to close by the agreed date. The buyer misses the closing date, and the seller demands the earnest money. The buyer then sends the designated broker a written notice claiming the seller caused the delay. The designated broker believes the seller is entitled to the funds. What should the designated broker do?
Correct Answer
C) Continue to hold the funds in trust and advise both parties to resolve the dispute by written agreement or seek legal action
Under WAC 308-124D, when a bona fide dispute exists over the disbursement of trust funds — even if the designated broker personally believes one party is entitled to the funds — the broker must continue to hold the funds in trust and advise both parties to either reach a written agreement or pursue legal remedies (such as filing a lawsuit or requesting mediation/arbitration as specified in the contract). The designated broker cannot unilaterally release disputed funds based on their own interpretation of the contract.
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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.
More Practice Of Real Estate Questions
In Wyoming real estate practice, an associate broker or salesperson is not associated with a responsible broker at renewal. What should the licensee remember?
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In Wyoming real estate practice, a salesperson applicant age is reviewed. What should the licensee remember?
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