A couple enters into a purchase contract to buy a house, and their parents are providing a $6,000 earnest money check. The check is deposited in the listing broker's escrow account. The buyers are unable to get financing, and the contract provides for return of the earnest money to the buyers. The buyers and seller agree in writing to the release of the earnest money. The listing broker should
Issue a $5,000 check to the buyers.
Since the buyers and the seller have agreed in writing to release the earnest money, the listing broker should return the full amount of the earnest money to the buyers, who are the original parties to the contract. The earnest money was provided by the parents, but it is the buyers who are entitled to its return since the contract stipulates their rights in this situation.
Issuing a check to the parents would be inappropriate because the earnest money is part of the buyers' contract with the seller. The parents provided the funds, but the contractual obligation lies with the buyers, who are entitled to receive the funds back directly in the event of a failed transaction.
Returning the earnest money check to the parents, minus expenses, would not comply with the contract terms. The buyers are the ones entitled to the full return of earnest money, and any deductions for expenses are not stipulated in the agreement for the return of the earnest money; thus, this choice misinterprets the contractual obligations.
While this option acknowledges the buyers as the recipients of the earnest money, it incorrectly suggests that expenses should be deducted from the amount. The contract provides for the total earnest money return without deductions, making this choice incorrect.
In this situation, the listing broker must return the full amount of the earnest money to the buyers based on the terms of the purchase contract and the mutual agreement for the release of funds. The buyers retain their right to the entire $6,000, as they were the ones who entered into the contract and are entitled to the return of the earnest money without any deductions.
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