A real estate broker wrote a full price offer of $350,000 for a buyer. The amount of the earnest money deposit was $25,000. The offer was accepted and the broker placed the deposit in her escrow or trust account. The next week, the buyer and the seller decided to cancel their agreement and notified the broker in writing to return the deposit. Which of the following is TRUE?

This choice is incorrect because the broker does not have the right to negotiate for her commission from the deposit unless there is a specific agreement stating so. In the case of a cancellation, the broker's commission is not automatically taken from the earnest money deposit.

This statement is also incorrect. The broker cannot unilaterally decide to subtract any part of her commission from the earnest money deposit without explicit authorization from both the buyer and seller. The deposit must be returned in full unless otherwise agreed.

This option is misleading, as the broker has not necessarily earned a commission if the transaction was canceled. Without a signed agreement entitling her to a commission, she cannot deduct any amount from the deposit before returning it.