Trust Funds
A buyer and seller have a dispute over who is entitled to an earnest money deposit after a transaction falls through. The broker should:
ARelease the funds to whoever demands them first
BAutomatically return the deposit to the buyer
CKeep the funds in trust until the dispute is resolved or seek guidance through interpleader✓ Correct
DTransfer the funds to the DRE for determination
Explanation
When there is a dispute over trust funds, the broker must not release the funds to either party until the dispute is resolved — either by written agreement of the parties, a court order, or arbitration award. The broker may file an interpleader action with the court to deposit the funds and be relieved of further liability.
Related California Trust Funds Questions
- What must a broker do when they receive a buyer's earnest money deposit check with instructions to hold it uncashed pending acceptance?
- What is 'conversion' in the context of trust funds?
- If a buyer's offer is rejected and they had deposited earnest money, the broker must:
- How often must a broker reconcile the trust fund bank account balance with the total of all client ledger balances?
- Under California law, a real estate broker must deposit trust funds received into the trust account no later than:
- A broker is required to maintain a columnar record (trust fund ledger) for the trust account. The purpose of this record is to:
- Which of the following is NOT a permissible disbursement from a broker's trust account?
- A broker's trust fund account must be maintained at:
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