Legal Library

Earnest Money Disputes

May 11, 2018

Author: UAR

On the legal hotline, we have noticed an uptick in calls dealing with earnest money disputes. We want to highlight the rule language that governs earnest money disputes and its disbursement.

Upon going under contract, the earnest money is most commonly placed in the Buyer’s Brokerage Trust Account. So brokers, when a transaction fails, how do you know which party receives the earnest money deposit?

Under the Utah Administrative Code R162-2f-403(b)(7), brokers are given specific instructions about the release of earnest money. The Rules states, “A principal broker may not release earnest money or other trust funds associated with a failed transaction unless:

  1. a) a condition in the Real Estate Purchase Contract authorizing disbursement has occurred; or
  2. b) the parties execute a separate signed agreement containing instructions and authorization for disbursement.”

If the principal broker is unable to determine from the REPC who should receive the earnest money, then he/she should wait until the parties have resolved the issue through the civil court (usually small claims) route. Be certain you can point to a provision in the REPC that authorizes the disbursement of earnest money prior to releasing the funds. If you are unable to determine, take a conservative approach and keep the funds in your trust account to limit your brokerage liability for improperly releasing the earnest money.

If you have any questions about this topic or any other legal questions, feel free to contact the legal hotline on Monday, Wednesday, or Friday from 8:30 a.m. to 4:30 p.m. at 801-676-5211. (This legal tip is not intended to represent specific legal advice. Each situation is different. Consult your own broker or attorney.)

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Relevant Topics

Earnest Money
REPC