Difficulty: Medium

Average Score: 50%

Buyer rescinds offer before acceptance. Earnest money:

Rationale

Earnest money is returned to the buyer if the buyer rescinds the offer before acceptance.

When a buyer rescinds their offer prior to acceptance, the earnest money, which serves as a deposit to demonstrate serious intent, is typically returned to the buyer. This is because no binding agreement has been established, allowing the buyer to withdraw their offer without penalty.

A (broker keeps in lieu of commission.) YOUR ANSWER

This option is incorrect because brokers are not entitled to retain earnest money simply for their services unless there is a formal agreement or contract in place. Since the offer was rescinded before acceptance, there is no commission owed, and thus the broker cannot keep the earnest money.

B (split between seller and broker.) YOUR ANSWER

This choice is also incorrect because there is no basis for splitting the earnest money when the buyer rescinds the offer before it has been accepted. Without an accepted offer, neither the seller nor the broker has a legitimate claim to the earnest money.

C (returned to buyer.) CORRECT

This is the correct answer, as the earnest money must be returned to the buyer if they rescind their offer prior to the seller's acceptance. The absence of an accepted contract means the buyer is entitled to reclaim their deposit without any penalties.

D (forfeited after 6 days.) YOUR ANSWER

This option is incorrect because forfeiture of earnest money typically requires a specific condition or clause outlined in a contract, which is not applicable when an offer is rescinded before acceptance. The buyer retains the right to the earnest money as long as there is no binding agreement.

Conclusion

In real estate transactions, earnest money serves as a good faith deposit. When a buyer rescinds an offer before it is accepted, the earnest money should be returned to them, as no binding contract exists. Other options, such as forfeiture or brokers retaining the funds, do not apply under these circumstances, emphasizing the buyer's rights in the transaction process.

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