Difficulty: Medium

Average Score: 57%

What MUST an affiliate broker do with earnest money received from a buyer?

Rationale

Deliver it to the principal broker.

An affiliate broker is required to deliver earnest money to the principal broker promptly, as this ensures proper handling and compliance with real estate regulations. This procedure protects the interests of all parties involved in the transaction and ensures that the earnest money is managed appropriately.

A (Keep it temporarily in an escrow account opened under his name.) YOUR ANSWER

An affiliate broker cannot keep earnest money in an escrow account under their own name, as this would violate regulations that require earnest money to be held in trust with the principal broker. The principal broker is responsible for managing client funds, maintaining proper accounting, and ensuring compliance with legal standards.

C (Keep it with the rest of the paperwork until the next visit to the principal broker's office.) YOUR ANSWER

Storing earnest money with paperwork until the next visit to the principal broker's office is not acceptable. This method delays the proper handling of funds and could jeopardize the transaction, as earnest money must be deposited in a timely manner to demonstrate the buyer's serious intent.

D (Give it to the seller for safekeeping.) YOUR ANSWER

Giving earnest money directly to the seller is inappropriate and risky. It bypasses the necessary safeguards and trust arrangements that should be in place by having the principal broker hold the funds, which helps prevent disputes and ensures that the money is used correctly in accordance with the purchase agreement.

Conclusion

In real estate transactions, the affiliate broker's duty is to deliver earnest money to the principal broker to ensure legal compliance and proper fund management. This protects both the buyer's and seller's interests and upholds the integrity of the transaction process. By adhering to this protocol, brokers help maintain trust and accountability in real estate dealings.

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