1. A real estate broker wrote a full-price offer of $350000 for a buyer. The earnest-money deposit was $25000. The offer was accepted and the broker placed the deposit in her escrow account. The next week the parties cancelled the contract in writing and asked the broker to return the deposit. Which is TRUE?
Answer: B
The broker must return the deposit unless specifically authorized otherwise.
In this scenario, the broker is required to return the earnest-money deposit of $25,000 since the parties have cancelled the contract in writing and have requested the return of the deposit. Without specific authorization or conditions outlined in the contract that allow for the broker to retain any portion of the deposit, the broker must comply with the request.
A) The broker must negotiate for her commission out of the deposit
This option is incorrect because there is no indication that the broker is entitled to negotiate her commission from the deposit in this situation. The contract was cancelled, and the parties have explicitly asked for the deposit to be returned, which takes precedence over any commission negotiations.
B) The broker must return the deposit unless specifically authorized otherwise
This statement is correct as it aligns with standard real estate practice. When a contract is cancelled and both parties request the return of the deposit, the broker has the obligation to return the full deposit unless there are specific terms in the agreement that state otherwise.
C) The broker may subtract one-half of her commission before returning the deposit
This option is incorrect as it implies that the broker has the right to deduct part of her commission from the deposit. Since the contract was cancelled and the request for return was made, the broker cannot unilaterally decide to deduct any amount without explicit authorization.
D) The broker has earned a commission and may automatically subtract the entire amount before returning the balance
This statement is also incorrect. The cancellation of the contract negates any automatic entitlement to a commission from the deposit. The broker must return the full amount of the deposit unless explicitly stated otherwise in the contract.
Conclusion
The correct answer is that the broker must return the deposit unless specifically authorized otherwise, reflecting the obligation to follow the request of both parties after a contract cancellation. All other options incorrectly suggest that the broker has a right to retain or negotiate her commission from the deposit despite the cancellation, which is not supported by the context provided.